The consultation paper issued by Securities and Exchange Board of India seeks public comments on a draft circular proposing to extend the benefit of early pay-in (EPI) in the commodity derivatives segment to options contracts, in addition to its current applicability to futures contracts. Under the existing framework prescribed in the SEBI Master Circular dated August 04, 2023, EPI allows market participants to deposit certified goods against futures contracts, potentially exempting them from certain margins except mark-to-market margins. Based on stakeholder representations, the Working Group and the Commodity Derivatives Advisory Committee recommended extending this benefit to options contracts as well. Accordingly, a draft circular proposes revising the relevant provisions to enable clearing corporations to provide EPI for all derivatives contracts. Public comments have been invited until May 26, 2026, after which the revised framework may be implemented to enhance market efficiency and flexibility.
Securities and Exchange Board of India
Consultation Paper on Draft Circular Clarifying Applicability of Early Pay-In Benefit in Commodity Derivatives Segment
SEBI- May 05, 2026 | Reports : Reports for Public Comments
Click here to provide your comments
Objective
1. This consultation paper seeks comments from the public and stakeholders on the proposal to extend the applicability of the benefit of early pay-in, currently available on futures contracts, to options contracts in the commodity derivatives segment.
Background
2. Para 11.3 of Chapter 11 of SEBI Master Circular SEBI/HO/MRD/MRD-PoD-1/P/CIR/2023/136 for Commodity Derivatives Segment dated Aug 04, 2023 prescribes norms for Early Pay-in Facility in respect of commodity derivatives, wherein, it is inter alia stated that:
“11.3. Early Pay-in Facility
11.3.1. Stock Exchanges shall provide early pay-in facility to market participants permitting market participants to deposit certified goods to the Stock Exchange accredited warehouse against relevant futures contracts sold. For such short positions against which early pay-in has been made, based on risk perception, stock exchanges may exempt imposition of all types of margins. However, Stock Exchanges shall continue to collect mark to market margins from such market participants against such positions.”
3. SEBI has received representations with respect to the aforementioned provisions, stating that the early pay-in (EPI) benefit is currently available only in respect of futures contracts. It has been requested that the EPI benefit may be also made applicable on options contracts.
Recommendation of the Working Group and the CDAC
4. The proposal was examined and deliberated in the meeting of the Working Group (WG) on Review of current regulatory framework of delivery and settlement applicable to Agricultural Commodity Derivatives Segment, wherein based on deliberation/ discussion, the WG recommended that early pay-in benefit may also be made applicable to options contract. Further, the recommendation of the WG was also placed before the Commodity Derivatives Advisory Committee (CDAC) meeting held on Feb 26, 2026, wherein the CDAC was broadly in agreement with the same.
5. In view of the above, a draft circular has been prepared modifying the provisions contained in paragraph 11.3.1 of SEBI Master Circular dated August 04, 2023, and is placed at Annexure-A.
Public Comments:
6. Comments are invited on the draft circular on “Clarification with respect to applicability of the benefit of early pay-in in Commodity Derivatives Segment”, placed at Annexure A. The comments/ suggestions should be submitted latest by May 26, 2026, through the online web-based form which can be accessed using the following link:
https://www.sebi.gov.in/sebiweb/publiccommentv2/PublicCommentAction.do?doPublicComme nts=yes
7. In case of any technical issue in submitting your comment through the web based public comments form, you may contact the following through email with the subject: “Consultation Paper on Draft Circular on Clarification with respect to applicability of the benefit of early pay-in in Commodity Derivatives Segment”.
1) mrd consultation@sebi.gov.in
2) Ms Neetika Rajpal, DGM (neetikar@sebi.gov.in)
3) Ms Deepika, AGM (deepika@sebi.gov.in)
Issued on: May 05, 2026
Annexure A
DRAFT CIRCULAR
SEBI/HO/MRD/MRD-POD-1/
May XX, 2026
To
The Managing Directors / Chief Executive Officers
All Recognized Stock Exchanges/Clearing Corporations having Commodity Derivatives Segment
Madam/Sir,
Subject: Clarification with respect to applicability of the benefit of early pay-in in Commodity Derivatives Segment
1. Para 11.3 of Chapter 11 of SEBI Master Circular SEBI/HO/MRD/MRD-PoD-1/P/CIR/2023/136 for Commodity Derivatives Segment dated Aug 04, 2023 prescribes norms for Early Pay-in Facility in respect of commodity derivatives.
2. Based on representations received from stakeholders and deliberations by the Working Group (WG) on “Review of current regulatory framework of delivery and settlement applicable to Agricultural Commodity Derivatives Segment and the Commodity Derivatives Advisory Committee (CDAC), paragraph 11.3.1 of the aforementioned Master Circular stands revised as under:
“11.3.1. Clearing Corporations shall provide early pay-in facility to market participants permitting them to deposit certified goods to the Clearing Corporation accredited warehouse against relevant derivatives contracts sold. For such short positions against which early pay-in has been made, based on risk perception, Clearing Corporations may exempt imposition of all types of margins. However, Clearing Corporations shall continue to collect mark to market margins from such market participants against such positions.”
3. The Circular shall come into force with immediate effect.
4. The Stock Exchanges and Clearing Corporations are advised to bring the provisions of this circular to the notice of their members and also to disseminate the same on their website.
5. This Circular is issued in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with Regulation 51 of the Securities Contracts (Regulation) (Stock Exchange and Clearing Corporations) Regulations, 2018 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
6. The Circular is issued with the approval of the competent authority.
7. This Circular is available on SEBI website sebi.gov.in under the category “Circulars” and “Info for Commodity Derivatives”.
