SEBI Clarifies Early Pay-In Benefit in Commodity Derivatives; MTM Margins to Continue

The Securities and Exchange Board of India (SEBI) has issued a clarification regarding the applicability of the early pay-in facility in the commodity derivatives segment. The clarification follows representations received from market participants and recommendations made by the Working Group on delivery and settlement in agricultural commodity derivatives and the Commodity Derivatives Advisory Committee (CDAC).

Under the revised framework, clearing corporations will continue to provide the early pay-in facility, allowing market participants to deposit certified goods in SEBI-accredited warehouses against relevant commodity derivative contracts. For positions where such early pay-in has been made, clearing corporations may, based on their risk assessment, exempt participants from all types of margins.

However, SEBI has specifically clarified that mark-to-market (MTM) margins must continue to be collected from participants even where the benefit of early pay-in is availed. This amendment revises paragraph 11.3.1 of the Master Circular governing the commodity derivatives segment.

The regulator has directed recognized stock exchanges and clearing corporations offering commodity derivatives trading to make the necessary system changes and inform their members about the revised requirements. The circular will come into force on September 21, 2026.

While early pay-in positions may receive relief from various margin requirements, market participants will still be required to meet ongoing MTM margin obligations, ensuring continued risk management in commodity derivatives trading.

To Read Full Circular, Download PDF Given Below