India, May 13 -- Markets regulator Sebi on Tuesday proposed allowing stock exchanges to introduce a phased approach to physical settlement for select agricultural commodity derivatives contracts in a bid to boost liquidity while retaining a strong linkage with the underlying physical market.

Under the proposal, exchanges would be permitted to revive illiquid contracts or launch new delivery-based contracts in select agricultural commodities that would initially trade as financially settled contracts, Sebi said in its consultation paper.

These contracts would mandatorily transition to physical settlement once they cross pre-defined thresholds related to Average Daily Traded Volume (ADTV) and/or open interest, or after two years from laun...