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SEBI Bans Derivative Trade In Agriculture Commodities

SEBI Bans Derivative Trade In Agriculture Commodities:

The Securities and Exchange Board of India (SEBI) has banned the derivative trade of seven agricultural commodities on the future’s platform of National Commodities and Derivatives Exchange (NCDEX) for a year.

  • The regulator has banned derivative contracts trade in chana, wheat, paddy (non-basmati), soyabean and its derivatives, mustard seed and its derivatives, crude palm oil and moong for a year with immediate effect.
  • The commodity derivatives market has been prone to such sudden suspensions of trading in agriculture items ever since it was introduced under the erstwhile Forward Markets Commission (FMC).


  • It is a statutory body established on 12th April, 1992 in accordance with the provisions of the Securities and Exchange Board of India Act, 1992.
  • The basic functions of the SEBI is to protect the interests of investors in securities and to promote and regulate the securities market.

Reasons for Ban:

To cool off Food Inflation:

  • India’s retail inflation rose to a three-month high of 4.91 % in November from 4.48 % in the previous month primarily because of a rise in food inflation to 1.87 % from 0.85 % over this period.

Double Digits WPI:

  • Wholesale Price Index-based inflation has remained in double digits for eight consecutive months beginning in April, mainly because of surging prices of food items.
  • In November, the wholesale price-based inflation surged to a record high of 14.23 % amid hardening of prices of mineral oils, basic metals, crude petroleum and natural gas.

To insulate future Price Shock:

  • In view of Rabi Output that might be affected morbidly because of fertiliser shortage faced in many parts of the country.
  • By banning future’s trade, the government is trying to insulate any price shock the market might feel in the days to come in case the production is not up to par.

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