SEBI revises commodity position limits: what traders need to know in 2026

SEBI has revised commodity position limits for clients in the commodity derivatives segment. The changes mainly affect agri-commodity derivatives, where client-level limits are now linked to deliverable supply and the classification of each commodity. SEBI has also changed the penalty structure for position limit violations.

SEBI's September 9, 2026 circular increases the client-level limits for broad, narrow and sensitive agricultural commodities to 2%, 1% and 0.5% of deliverable supply, respectively. It also changes the definition of a broad commodity and revises penalties for position limit violations. The circular is effective immediately.

Commodity position limits are caps on the open position a client can hold in a commodity derivative. They are used to limit excessive concentration and reduce the risk created by very large positions.

SEBI's latest changes cover the client-level numerical limits for agri commodity derivatives. The applicable limit depends on the commodity's category and its deliverable supply for the relevant year.

SEBI's September 9 circular revises the client-level position limits under Chapter 3 of the Master Circular for Commodity Derivatives. The earlier limits were 1% for broad, 0.5% for narrow and 0.25% for sensitive commodities.

SEBI has also changed how an agricultural commodity qualifies as a broad commodity.

An agricultural commodity must not be sensitive and must meet either of these tests: average deliverable supply over the past five years of at least 10 lakh metric tonnes, or at least Rs 5,000 crore in monetary terms.

Earlier, both conditions had to be met. Under the revised "or" test, some commodities may move from the narrow to broad category. They will retain the 1% limit for one year, after which the exchange may raise it to 2% following a review.

SEBI has revised the penalty provisions for position limit violation at the client level.

For a violation above 2% of the prescribed limit, the penalty is based on the excess position, closing price, number of days and a 2% factor, subject to a cap of Rs 2 lakh.

For a violation of up to 2%, the same calculation applies, but the cap is Rs 10,000. The circular also specifies that the applicable option penalty is based on the near calendar month underlying futures closing price.

The member must bring the position within the prescribed limit by the next trading day. If the breach continues, the exchange can square off the excess position without further notice.

The revised rules also cover repeated breaches.

If a trading member has more than three violations above 2% in a calendar month for the same commodity, the exchange can place the member in square-off mode for one day.

More than three violations across both penalty categories can attract an additional penalty equal to the open interest violation penalty. This does not apply when the breach arises exclusively from clubbing of positions. SEBI may also consider action for repeated violations.

The revised commodity position limits do not mean that the same limit applies to every commodity. The applicable limit still depends on the commodity's category and deliverable supply.

Traders dealing in agri commodity derivatives need to check the category assigned to the commodity and the position limit published by the relevant exchange.

The revised penalty rules also make position monitoring important. A breach can result in a monetary penalty, while a continuing breach can lead to the exchange squaring off the excess position.

The SEBI circular came into force with immediate effect on September 9, 2026. Exchanges were directed to put the required systems in place, make rule changes where needed and inform market participants.

MCX issued its implementation circular on the same day, referring to the SEBI circular and asking members and their constituents to take note of the changes and ensure compliance.

SEBI's 2026 revision changes client-level commodity position limits, agricultural commodity classification and penalty provisions. The revised limits are 2% for broad, 1% for narrow and 0.5% for sensitive commodities, based on deliverable supply.

Traders still need to check the category and exchange-published limit for the commodity they trade. Position limit breaches can also result in penalties and, if they continue, square-off action.

Ans. Commodity position limits are caps on the open position a client can hold in a commodity derivative. They are used to limit excessive concentration in the market.

Ans. For agricultural commodities, the revised client-level limits are 2% of deliverable supply for broad commodities, 1% for narrow commodities and 0.5% for sensitive commodities.

Ans. A broad agricultural commodity is one that is not sensitive and has average deliverable supply of at least 10 lakh metric tonnes over five years or at least Rs 5,000 crore in monetary terms.

Ans. A fine may be imposed on the member who committed such an act. This must be rectified the next day, and excess positions can be squared off by the exchange.

Ans. The revised commodity position limits took effect immediately on September 9, 2026.

• SEBI: SEBI circular on revised commodity position limits, Sept 9, 2026

• MCX: MCX implementation circular, Sept 9, 2026

• SEBI: SEBI consultation paper on commodity position limits, May 12, 2026