Mumbai, May 13 -- The markets regulator has proposed easing physical settlement rules for select agricultural commodity derivatives to boost liquidity and participation in a market that has struggled with weak volumes and operational hurdles.

In a Tuesday consultation paper, the Securities and Exchange Board of India (Sebi) proposed a phased framework under which some agri commodity contracts can initially trade as cash-settled contracts before transitioning to mandatory physical delivery.Mint explains:

Sebi has recommended allowing exchanges to launch or revive select agricultural commodity derivatives contracts as financially settled products in the initial phase, before mandatorily shifting them to physical settlement once they meet ...