Union List and State List
Also written Union List vs State List · Seventh Schedule (commodities)
The Constitutional division, under Schedule VII, that places securities regulation under the Centre's Union List while spot-market trade in agricultural commodities falls under the states' State List.
In plain language
India's Constitution divides law-making power between the Centre and the states through three lists in its Seventh Schedule. Commodity markets sit right on the line between two of them.
Securities — which includes commodity derivatives, since they are defined as securities — is a Union List subject, so the Centre and SEBI regulate it. But the spot market, where farmers and traders actually buy and sell physical agricultural produce, is a State List subject, so individual states regulate it instead.
How it works
Chapter 8, section 8.1.1, states this directly: the subject of securities is under the Union List in Schedule VII of the Constitution, whereas the spot market trade in commodities — particularly agricultural commodities — is under the State List.
This is why India's commodity market has two separate regulatory tracks running side by side. Commodity derivatives, traded on exchanges like MCX and NCDEX, fall under SEBI because they are securities under a Union List subject. But the mandis and APMC markets, where the same physical commodities are bought and sold for ready delivery, fall under state governments and state APMC laws instead — a structural split that explains why SEBI's reach stops at the derivatives market and does not extend into regulating the physical mandi trade itself.
A worked example
A soybean farmer in Madhya Pradesh sells his physical crop at the local mandi for Rs 4,200 per quintal — this transaction falls under the Madhya Pradesh APMC Act, a State List matter, and the state government's agricultural marketing rules govern it.
A trader in Mumbai, separately, buys soybean futures on NCDEX at a price referencing the same underlying commodity — this transaction falls under SEBI, because commodity derivatives are securities, and securities is a Union List subject regulated centrally. The same commodity, soybean, is therefore regulated by two entirely different authorities depending on whether the transaction is a physical mandi sale or an exchange-traded derivative.
Why NISM asks about it
Chapter 8 (Legal and Regulatory Environment), section 8.1.1, "Central Government," in the opening paragraphs establishing the three-tier regulatory framework. Expect a question asking which list spot agricultural trade falls under — the State List, with individual state governments as the answer, not the Central Government or SEBI.
Common exam traps
- Spot agricultural commodity trade is a State List subject, regulated by individual state governments — not by SEBI or the Central Government.
- Commodity derivatives are still securities, so they remain a Union List, SEBI-regulated matter, even though the underlying commodity's spot trade is state-regulated.
- This split is specifically about agricultural commodities' spot trade. The workbook does not extend the State List point to the derivatives segment of any commodity.
Where this is taught
Free preparation for NISM Series XVIRelated terms
- CDMRDSEBI's dedicated department for regulating the commodity derivatives segment, created after the 2015 merger with the erstwhile commodity regulator FMC and now folded into SEBI's Market Regulation Department.
- Derivative under SCRASCRA's own definition of a derivative — commodity derivatives, plus any instrument deriving value from an underlying security or index — which brings commodity futures within SEBI's jurisdiction as securities.
- Three-tier regulatory frameworkThe layered structure of commodity market regulation in India — Government of India, SEBI, and the Exchanges — each with a distinct role, as against a two-tier or single-regulator structure.
- Unit-linked insurance policy exclusionThe carve-out in the SCRA definition of "securities" that leaves out a unit-linked insurance policy, even though it looks like a mutual fund unit on the surface.
- Integration of broking activitiesSEBI's September 2017 circular permitting equity broking and commodity derivatives broking under a single entity — the intermediary-level step that preceded single-exchange trading from 1 October 2018.