The Securities and Exchange Board of India (SEBI) has released a consultation paper proposing a key regulatory change in the commodity derivatives segment, aimed at expanding the scope of the early pay-in (EPI) facility to options contracts.
Currently, the early pay-in benefit is available only for futures contracts, allowing market participants to deposit certified goods with exchange-accredited warehouses against sold positions. This mechanism enables potential exemption from certain margin requirements, subject to risk assessment, while still requiring mark-to-market margins.
In its latest proposal, SEBI has suggested extending this benefit to options contracts as well, following representations received from market participants. The move is expected to enhance efficiency in settlement processes and provide greater flexibility to traders in the commodity derivatives market.
The proposal has already been reviewed by a Working Group tasked with examining the regulatory framework for delivery and settlement in agricultural commodity derivatives. The group recommended extending the EPI benefit to options, a view that was broadly endorsed by the Commodity Derivatives Advisory Committee (CDAC) during its meeting held on February 26, 2026.
SEBI has now placed a draft circular outlining the proposed changes and has invited public and stakeholder comments. Market participants can submit their feedback through SEBI’s online portal until May 26, 2026.
If implemented, the proposed framework would allow clearing corporations to offer early pay-in facilities for derivatives contracts more broadly, potentially easing margin requirements for participants who meet the criteria. The regulator noted that clearing corporations may exempt certain margins for such positions, while continuing to collect mark-to-market margins.
The move is part of SEBI’s broader efforts to refine the regulatory framework governing commodity derivatives, improve market efficiency, and align practices across different contract types.