[Arjun Chaudhary and Jainam Shah are 4th Year Law students at Gujarat National Law University]
The Indian government’s landmark move to introduce the “National Minerals Exchange” has been hailed as “India’s LME Moment”, a nod to the London Metal Exchange (“LME”), which has played a major role in controlling global metal pricing over the last century. Although this reform may seem ambitious at a global level, its true significance is deeply domestic.
For years now, India’s huge mines and minerals wealth has been traded in a fragmented market which is characterized by irregular, opaque and negotiated pricing. This has forced its own industry to rely on the LME for price discovery. Further, mineral supply chains are as sensitive as any other material, say oil pipelines. For instance, China’s export curbs on rare earths once pushed global prices sharply upward, showing how fragile supply chains can be.
The Mines and Minerals (Development and Regulation) Amendment Bill, 2025 (“MMDR Amendment Bill”), which enables this exchange, considers the bourse to be much more than just a new derivative or commodity trading platform. It is a foundational reform which aims to establish price transparency and a robust domestic market for critical minerals. However, the exchange’s short-term success will depend on its ability to manage three intricate challenges: (i) establishing a distinctive and resilient regulatory framework; (ii) achieving seamless integration with the current financial ecosystem; and (iii) developing a reliable technological infrastructure for a market in urgent need of clarity and security, despite its long-term vision of global influence.
The Regulatory Bedrock: SEBI’s Expanding Role
The creation of an Indian Mineral Exchange under the MMDR Amendment Bill sounds like a bold leap into the future. But every exchange is only as strong as its regulator. In India’s case, that role inevitably falls to the Securities and Exchange Board of India (“SEBI”), which has acted as the single market regulator for securities and commodities since it absorbed the Forward Markets Commission (“FMC”) in 2015. This absorption was meant to unify oversight, plug loopholes, and prevent a repeat of the catastrophic gaps that allowed the National Spot Exchange (“NSEL”) scandal to occur.
The Bill outrightly flags insider trading and market manipulation as threats that must be prevented through specific deterrent rules. That is a crucial signal because commodity markets are especially prone to distortions by insiders with advance knowledge of production volumes, shipment delays, or government policy. In the absence of real-time surveillance and a strong clearing mechanism, any such abuse could unravel the credibility of the entire exchange. SEBI has decades of experience monitoring India’s stock and commodity markets with state-of-the-art technology and position limits, and extending these tools to mineral trading is essential.
The NSEL crisis showed how fake warehouse receipts can collapse trust overnight, making verifiable digital receipts essential for the new exchange. Every ton of ore or metal traded must be backed by verifiable, auditable, and electronic receipts issued only by accredited warehouses and certified assessors. The law must empower SEBI or a designated authority under the Ministry of Mines to conduct random audits and enforce strict liability on warehouses that fail to maintain integrity.
The legal environment must be watertight. At present, however, there is some ambiguity. The exchange will be created under the MMDR amendment, but securities law, specifically the SEBI Act, 1992 and Securities Contracts (Regulation) Act, 1956, will also apply once standardized contracts and clearing come into play. Unless the division of powers between the Ministry of Mines and SEBI is clearly laid out, the system risks regulatory arbitrage. A dual or unclear mandate could paralyze the platform long before it even takes its inaugural steps.
Finance at the Core: Price Discovery, Liquidity, and Global Ambition
If regulatory soundness is the foundation, the financial design of the exchange is its soul. India is not simply launching a new market, but creating what could become the third major exchange ecosystem in the country, alongside the National Stock Exchange (“NSE”) for equities and the Multi Commodity Exchange (“MCX”) for commodity derivatives. The ambition is to build a platform that can discover fair prices for minerals, generate liquidity, and serve both domestic industries and global participants.
Price discovery is not merely a technical phrase here, albeit the reason for existence of the exchange. For decades, Indian miners and manufacturers have referenced benchmarks set in LME or Shanghai Futures Exchange (“SHFE”). That dependence is problematic because those benchmarks do not always reflect local supply-demand realities. If the Indian Mineral Exchange gains traction, domestic prices of iron ore, bauxite, or lithium will be shaped by transparent trading in rupees, rather than imported benchmarks. This could directly benefit miners, who will realize better value, and manufacturers, who can hedge input costs via future contracts rather than gamble on global volatility.
Liquidity, however, will be the toughest nut to crack. An exchange cannot succeed unless both sides of the market, sellers and buyers, show up in force. Miners must be persuaded that listing output on the exchange yields better returns than bilateral contracts. Buyers (steel, auto, power, and EV industries) must believe the platform is reliable enough to anchor long-term procurement. The government may need to create a mandate that a portion of public-sector sales (for example, NMDC’s iron ore) be routed through the exchange to seed liquidity. Once volumes build, confidence will follow. Liquidity is both a chicken-and-egg problem and the decisive test. Without mandated participation by public sector undertakings or clear incentives, volumes may remain too thin for credible price discovery.
India must decide whether the exchange will serve as a domestic stabilizer or a global price-setter. A domestic model secures Indian industries with rupee contracts, while an international model, like the LME, could raise India’s global influence but requires higher liquidity, stronger governance, and international trust.
For now, India may not have the depth to jump straight to global benchmark status. But even as a domestic hub, the exchange can radically transform the financial ecosystem. It can create new instruments (futures, options) for industries to hedge risks, attract institutional investors looking to trade in commodities, and even encourage global miners to list contracts in India to reach Asian buyers. Over time, as liquidity grows, the possibility of evolving into a global reference point remains open.
Infrastructure and Global Lessons: From London to Shanghai
The true foundation of India’s National Mineral Exchange lies in a cutting-edge “technological infrastructure”. A world-class digital backbone is an absolute necessity to mitigate the risk of such an exchange becoming a mere theoretical construct. This demands more than just a trading screen; it needs a much more sophisticated ecosystem built on high-frequency trading (“HFT”) capabilities, ultra-low latency networks and strong cybersecurity measures.
India’s dedication to such technological leaps can be seen from broader national initiatives such as “National Critical Mineral Mission”, which not only focuses on resource security but also on cultivating indigenous technological competence, backed by a funding allocation of Rs. 159.7 million. Further, the launch of Mining Tenement System (“MTS”) is a significant step towards digitizing the industry and regulatory processes. Such a platform improves decision making and resource allocation by leveraging data-analytics and real-time monitoring, which acts as a precedent for the kind of transparency and ease-of-doing-business that the exchange must embody.
This technological imperative is underscored by “lessons from global model”. The LME, despite its venerable history, experienced a serious crisis during the nickel short squeeze of 2022 partly attributed to its technological limitations. Its reliance on manual intervention to cancel trades and lack of automated circuit breakers or volatility controls was one of the main reasons of the crisis.
Conversely, India can draw its inspiration from LME’s counterpart, SHFE, which offers a state-of-the-art, electronic-first approach. The rapid ascent of SHFE to global prominence, particularly in Asian Trading Hours is a direct testament to such an electronic model. Such a model enables massive trading volumes, precise price discovery and efficient clearing, all underpinned by a robust digital infrastructure. China’s model truly depicts how a modern exchange can rapidly build liquidity and digital dominance through technological superiority.
Conclusion
The path forward for India is very clear. It is not a frequent phenomenon that the Indian Government announce a policy shift that might redefine the way in which global trade of raw materials takes place. However, there are some ambiguities that India needs to deal with, in order to successfully set up a National Minerals Exchange. First, the statute must unambiguously allocate a supervisory authority between SEBI and Ministry of Mines in order to avoid any type of regulatory arbitrage. Second, participation must be induced by instilling confidence among the stakeholders, which would build up volumes and liquidity in the exchange. Third, the exchange should first set-up to meet the domestic needs, similar to SHFE, and later transform into an international model, similar to LME, as liquidity and confidence grows. Lastly, the exchange must prioritize a secure, electronic infrastructure interoperable with Mining Tenement System, supporting low-latency matching and independent cybersecurity certification. Such measures could translate the Indian Government’s ambition of a “National Minerals Exchange” into a practicable institution.
– Arjun Chaudhary & Jainam Shah