SEBI Eyes Commodity Markets: Are Your Gold, Silver, Crude Oil Trades Next? Regulator Launches Major P&L Probe!

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AuthorAkshat Lakshkar|Published at:
SEBI Eyes Commodity Markets: Are Your Gold, Silver, Crude Oil Trades Next? Regulator Launches Major P&L Probe!
Overview

India's market regulator, SEBI, is now scrutinizing commodity derivatives trading. Brokers have been asked to submit client profit and loss statements for gold, silver, crude oil, and natural gas futures and options over the past three and a half years. This move follows SEBI's extensive investigations into equity derivatives, which revealed significant retail investor losses and led to regulatory actions, signaling a potential for similar oversight in the commodity segment.

Securities and Exchange Board of India (SEBI) is expanding its regulatory gaze to the commodity derivatives segment, a move that could significantly impact traders and brokers in gold, silver, crude oil, and natural gas markets.

SEBI Broadens Scrutiny to Commodities

  • SEBI has formally requested top commodity derivatives brokers to submit profit and loss (P&L) statements for their clients' trading activities.
  • The data sought covers a period of three and a half years, from fiscal year 2023 (FY23) through October of FY26.
  • This investigation targets futures and options trading in key commodities like gold, silver, crude oil, and natural gas.

Lessons from Equity Derivatives

  • This action mirrors SEBI's recent deep dives into the equity derivatives market, where studies revealed substantial retail investor losses.
  • A SEBI study found individual investors lost an aggregate ₹1.8 trillion in FY22-24 and ₹1.06 trillion in December 2024 to May 2025 from equity derivatives, particularly weekly index options.
  • Following these findings, SEBI implemented measures to cool down the 'derivatives fever,' including rationalizing weekly options contracts.

Data Demand from Brokers

  • The regulator's request is aimed at understanding the extent of potential losses incurred by retail investors in commodity derivatives.
  • While SEBI has not commented publicly, the demand for P&L data suggests a proactive approach to market oversight.
  • Brokers like Groww, Zerodha, Angel One, Upstox, ICICI Direct, and Motilal Oswal Financial Services Group, which are active in equity derivatives, also operate in the commodity derivatives space and are likely among those approached.

The Growing Commodity Derivatives Market

  • Commodity derivatives trading in India resumed in 2002 after a 40-year hiatus.
  • The sector includes major exchanges like Kotak Mahindra-led MCX (Multi Commodity Exchange), NCDEX, NSE, and BSE.
  • MCX, India's largest commodity derivatives bourse with over 90% market share, saw options premium turnover of ₹5.38 trillion from April-September 2025.
  • The unique client code (UCC) count in commodity derivatives stands at 1.3 million, which is about 1% of the over 120 million UCCs in the equities segment, indicating a smaller but growing market.

Potential Market Impact

  • While commodity derivatives are a smaller market than equities, SEBI's investigation could lead to new regulations if significant retail losses are identified.
  • Such measures might include restrictions on trading products or rationalizing contract specifications, potentially impacting liquidity and trading strategies.
  • Market participants express concern that stringent regulations, similar to those in equity derivatives, could stifle the growth of the nascent commodity derivatives market.

Impact

  • This news could lead to increased volatility in commodity derivative prices as investors and brokers anticipate potential regulatory actions.
  • Brokers offering commodity derivatives might face compliance costs and potential changes in their business models.
  • Retail investors in commodities could see restrictions that limit their trading activities or change their investment strategies.
  • Impact Rating: 7

Difficult Terms Explained

  • Commodity Derivatives: Financial contracts whose value is derived from the price of underlying physical goods like gold, oil, or agricultural products. They include futures and options.
  • Futures: A contract to buy or sell a specific commodity at a predetermined price on a future date.
  • Options: A contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date.
  • P&L Statements: Profit and Loss statements, which show a client's financial performance over a specific period from trading activities.
  • Retail Investors: Individual investors who trade for their own account rather than on behalf of companies or other investors.
  • Corporate Hedgers: Companies that use derivatives to protect themselves against price fluctuations in commodities they use or produce.
  • Foreign Portfolio Investors (FPIs): Overseas investors who invest in Indian financial markets.
  • UCC (Unique Client Code): A unique identifier assigned to each client by a broker for trading purposes.
Disclaimer:This content is for educational and informational purposes only and does not constitute investment, financial, or trading advice, nor a recommendation to buy or sell any securities. Readers should consult a SEBI-registered advisor before making investment decisions, as markets involve risk and past performance does not guarantee future results. The publisher and authors accept no liability for any losses. Some content may be AI-generated and may contain errors; accuracy and completeness are not guaranteed. Views expressed do not reflect the publication’s editorial stance.