Commodity derivatives: SEBI revises penalties for client-level position limit breaches and the test for a “Broad” agricultural commodity
SEBI has revised the penal provisions for open-interest violations at client level in the commodity derivatives segment: the penalty is 2% of the value of the excess for the days it continues, or ₹2,00,000 (₹10,000 where the excess is up to 2% of the limit), whichever is lower. No additional penalty applies where the breach arises only from clubbing. The definition of “Broad Commodity” and client position limits are also revised.
Key facts
In 30 seconds
- Circular No. HO/47/16/13(5)2026-MRD-POD1/I/20735/2026 is dated 9 September 2026 and is in force with immediate effect.
- Violation above 2% of the limit: excess × closing price × days × 2%, or ₹2,00,000, whichever is lower.
- Violation up to 2% of the limit: the same formula, or ₹10,000, whichever is lower.
- The additional penalty for repeat instances does not apply where the violation arises exclusively on account of clubbing of positions.
- Broad Commodity: average deliverable supply for the past five years of at least 10 lakh MT, or at least ₹5,000 crore.
- Client limits: 2% of deliverable supply for Broad, 1% for Narrow, 0.5% for Sensitive commodities.
हिंदी में सार
SEBI ने 9 सितंबर 2026 के सर्कुलर से कमोडिटी डेरिवेटिव्स में क्लाइंट-स्तर की position limit तोड़ने पर जुर्माने के नियम बदले हैं: सीमा से 2% से ज़्यादा उल्लंघन पर अतिरिक्त पोज़ीशन के मूल्य का 2% या ₹2 लाख, जो कम हो; 2% तक के उल्लंघन पर ₹10,000 तक। सिर्फ़ clubbing की वजह से हुए उल्लंघन पर अतिरिक्त जुर्माना नहीं लगेगा। “Broad Commodity” की परिभाषा और कृषि जिंसों की सीमा (2%, 1%, 0.5%) भी संशोधित हुई है।
Background
Position limits in the commodity derivatives segment are set out in Chapter 3 of SEBI’s Master Circular for the Commodity Derivatives segment dated 4 August 2023. The circular of 9 September 2026 records that the current limits were introduced in 2017, and that SEBI had received representations to review the limits for agri commodity derivatives and to cap the penalty for position limit violations.
Based on those representations, the recommendations of a Working Group on the regulatory norms for the agri commodity derivatives segment and of CDAC, and public comments, SEBI has modified paragraphs 3.4.3 and 3.5.2 of the Master Circular.
Penalty for position limit violation (Annexure J)
The monetary penalty is on the concerned member for violations at client level in open interest, whether on own account, on account of clients or at clubbed client level.
| Size of violation | Penalty |
|---|---|
| More than 2% of the prescribed limit | Limit exceeded × closing price × number of days the violation continued × 2%, or ₹2,00,000, whichever is lower |
| Up to 2% of the prescribed limit | Limit exceeded × closing price × number of days the violation continued × 2%, or ₹10,000, whichever is lower |
For options, the penalty is computed on the close price of the near calendar month underlying future. The penalty is credited to the Investor Protection Fund of the exchange.
- The member must bring the position within the limit by the next trading day. If the violation continues, the exchange squares off the excess position without further notice.
- If violations of more than 2% are observed more than three times for a trading member in a calendar month in the same commodity, the exchange puts the member on square-off mode for one day.
- If instances of either kind are observed more than three times in a calendar month, an additional penalty equal to the penalty charged is imposed on the trading member — except where the open position violation arises exclusively on account of clubbing of positions.
- For repeated violations, SEBI may consider action against the member.
“Broad Commodity” redefined
An agricultural commodity is a Broad Commodity if it is not a Sensitive Commodity and its average deliverable supply for the past five years is at least 10 lakh metric tons in quantity, or at least ₹5,000 crore in value.
Client-level position limits
| Category of commodity | Overall client-level limit |
|---|---|
| Broad | 2% of the deliverable supply |
| Narrow | 1% of the deliverable supply |
| Sensitive | 0.5% of the deliverable supply |
The figures are rounded off downward. A commodity that moves from Narrow to Broad because of the new definition keeps the 1% limit for one year; after that the exchange may, on review and upon satisfaction, raise it to 2%.
What exchanges and members should do
Exchanges are to put systems in place, amend their bye-laws, rules and regulations where needed, and bring the circular to the notice of market participants. Members should recheck client and clubbed positions against the revised limits, since the excess must be cut by the next trading day.
Questions and answers
What is the penalty for breaching a client-level position limit in commodity derivatives?
Where the violation is more than 2% of the prescribed limit: limit exceeded × closing price × number of days the violation continued × 2%, or ₹2,00,000, whichever is lower. Where it is up to 2% of the limit, the same formula applies with a ceiling of ₹10,000.
Is there a penalty when the breach is only because positions were clubbed?
The additional penalty that applies when instances are observed more than three times in a calendar month is not imposed on a trading member where the open position violation arises exclusively on account of clubbing of positions.
How soon must an excess position be reduced?
The member has to bring the position within the prescribed limit by the next trading day after the day of violation. If the violation continues, the exchange squares off the excess position without further notice to the member.
What is a Broad Commodity now?
An agricultural commodity that is not a Sensitive Commodity and whose average deliverable supply for the past five years is at least 10 lakh MT in quantitative terms or at least ₹5,000 crore in monetary terms.
Does a commodity that becomes Broad get the 2% limit at once?
No. It initially retains the position limit of 1% for one year. After that, the exchange may, on review and upon satisfaction, increase the limit to 2%.
Published 9 September 2026. Updated 8 October 2026. This report is for general information and is not professional advice. Read the source document before acting on it.