The Securities and Exchange Board of India (Sebi) has proposed a new framework for agricultural commodity derivatives that allows select contracts to begin as financially settled instruments. This approach aims to address liquidity constraints by enabling contracts to operate without immediate physical delivery, which could enhance participation and market depth. The transition to compulsory physical settlement will occur once predefined thresholds for average daily traded volume or open interest are met, or after two years, whichever comes first. Sebi emphasized that this phased strategy is designed to ensure a more flexible and transparent market environment. The proposal retains physical settlement as the ultimate goal, with contract specifications for quality standards and delivery mechanisms defined upfront. Initially, this framework may be piloted with commodities such as maize, groundnut, and chilli, and Sebi has invited public feedback on the proposed approach and commodity selection.