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SEBI Regulation / Commodity Derivatives MarketsMedium5 hours ago

SEBI likely to allow co-location for commodity markets next year

Reportedly in final-stage discussions, with metals and energy first and agriculture excluded — but no official circular yet.

01 / What happened

What happened

SEBI is in final-stage discussions to allow co-location in India's commodity derivatives market, with a rollout likely in H1 2027.

India's market regulator SEBI is reportedly in the final stages of discussions to allow co-location services in the country's commodity derivatives market, with a rollout likely in the first half of 2027, according to three people aware of the development who spoke to Livemint on condition of anonymity.

Co-location lets trading participants place their servers and IT equipment inside an exchange's data centres, cutting the time it takes for orders to reach the market — where every millisecond can make a difference in trading outcomes.

Under SEBI's existing rules, co-location is not permitted in the commodities segment. The regulator's Master Circular for the Commodity Derivatives Segment (dated August 4, 2023) explicitly prohibits co-location or any facility that puts some members at a disadvantageous position versus others. Co-location, by contrast, has been available in Indian equities for over two decades, and the proposed c

The proposal is discussed at every meeting of SEBI's Commodity Derivatives Advisory Committee (CDAC), one source said. SEBI may initially restrict co-location to non-agricultural commodities, because several farm contracts are categorised as shallow, with low volumes and poor liquidity. A Reuters report from December 2025 said a SEBI panel was inclined to allow co-location in metals and energy, wi

The move does not come out of nowhere: SEBI's CDAC was actively discussing the idea as early as May 2025, industry body ANMI has separately lobbied for a faster rollout, and MCX — which dominates India's commodity derivatives trading and moved to a TCS-backed platform in late 2023 — has been in favour of offering such services.

The timing is significant because it fits into a broader opening of India's commodity derivatives market to institutional participation. In a consultation paper issued on August 11, 2026, SEBI proposed letting foreign portfolio investors (FPIs) trade non-agricultural index derivatives and physically settled non-agri commodity derivatives, provided they square off or roll over positions before the

Fact 1SEBI is in final-stage discussions to allow co-location in the commodity derivatives market, with rollout likely in H1 2027, per three anonymous sources cited by Livemint.
1
Fact 2Current SEBI rules (Master Circular, Aug 4 2023) prohibit co-location in the commodity derivatives segment.
4
Fact 3SEBI's Aug 11, 2026 consultation paper proposed wider FPI participation in non-agri commodity derivatives; CDAC has backed the proposals.
11,
What Is Confirmed

What is confirmed

Facts corroborated by the sources listed below.

  • SEBI is in final-stage discussions to allow co-location in the commodity derivatives market, with rollout likely in H1 2027, per three anonymous sources cited by Livemint.
  • Current SEBI rules (Master Circular, Aug 4 2023) prohibit co-location in the commodity derivatives segment.
  • Co-location may initially be restricted to non-agricultural commodities (metals and energy), with agri excluded due to shallow market depth and inflationary concerns.
  • SEBI's Aug 11, 2026 consultation paper proposed wider FPI participation in non-agri commodity derivatives; CDAC has backed the proposals.
02 / Why it matters

Why it matters for me

Traders could host servers in exchange data centres, cutting latency; commodity markets would align with global and equity-market norms; institutional (FPI) participation could deepen.

Market Structure · Technology Access

Opportunity · High · 0.85

Commodity Traders And Prop/algo Trading Firms · MCX And Other Commodity Exchange Participants

Commodity traders, especially algo/prop firms, could place servers in exchange data centres from H1 2027, cutting order latency.

Market Access · Liquidity

Opportunity · Medium · 0.75

FPIs And Institutional Investors Eyeing Indian Commodities

Alongside proposed FPI expansion, institutional participation in Indian commodity derivatives could widen, deepening liquidity.

Market Fairness

Risk · Medium · 0.7

Brokers And Market Infrastructure Professionals · Hedgers In Metals, Energy And Agri Value Chains

Small participants without co-location budgets could face a speed disadvantage; agri contracts may be excluded, leaving shallow segments unchanged.

03 / The one thing

What to remember

The one thing
It is likely coming in H1 2027 (metals/energy first, agri excluded), but no official SEBI circular exists yet — treat as probable, not done.

SEBI is reportedly close to allowing co-location in commodity markets — rollout likely H1 2027, metals and energy first, agri excluded. No official circular yet.

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Verified sources (8)

Evidence behind the crack
News/Livemint

Sebi likely to allow co-location for commodity markets next year

Primary ReportAccessed Sep 11, 2026
News/Reuters

India market regulator panel to recommend easing rules for commodity derivatives

SupportingAccessed Sep 11, 2026
News/Business Standard

Sebi may allow colocation in commodity bourses to boost efficiency

SupportingAccessed Sep 11, 2026
Regulator/SEBI

Master Circular for Commodity Derivatives Segment (4 Aug 2023)

Primary DocumentAccessed Sep 11, 2026
Regulator/SEBI

Consultation Paper on FPI Participation in Exchange Traded Commodity Derivatives (11 Aug 2026)

Primary DocumentAccessed Sep 11, 2026
News/ET Legal

SEBI proposes wider FPI participation in non-agri commodity derivatives

SupportingAccessed Sep 11, 2026
News/Financial Express

SEBI panel may ease curbs on commodity derivatives, lift agri trading ban

SupportingAccessed Sep 11, 2026
News/The Hindu

ANMI seeks faster roll-out of co-location in commodity markets

SupportingAccessed Sep 11, 2026

Claims and linked sources

5 claims
FactualReported unconfirmed0.9 confidence

SEBI is in final-stage discussions to allow co-location in the commodity derivatives market, with rollout likely in H1 2027, per three anonymous sources cited by Livemint.

Linked evidence
RegulatoryConfirmed1 confidence

Current SEBI rules (Master Circular, Aug 4 2023) prohibit co-location in the commodity derivatives segment.

Linked evidence
AnalysisReported unconfirmed0.85 confidence

Co-location may initially be restricted to non-agricultural commodities (metals and energy), with agri excluded due to shallow market depth and inflationary concerns.

FactualConfirmed0.9 confidence

SEBI's Aug 11, 2026 consultation paper proposed wider FPI participation in non-agri commodity derivatives; CDAC has backed the proposals.

AnalysisAnalysis0.8 confidence

Co-location plus expanded FPI access could tighten price discovery, improve liquidity and align India with global standards; SEBI's caution stems from past manipulation concerns and physical-delivery links.

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