Coal Exchange Rules tightened in revised draft as Centre sharpens oversight, curbs market abuse

New Delhi: The Ministry of Coal has significantly strengthened the proposed regulatory architecture for coal trading platforms in the revised Draft Coal Exchange Rules, 2025, moving beyond the September consultation version to introduce tighter governance norms, explicit market-abuse definitions and sharper oversight powers. The revised draft, issued for public consultation on December 19, reflects the government’s assessment that coal trading is set to transition from administratively driven sales to a competitive market framework as domestic production rises and surplus availability emerges.

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“The recent policy reforms in the coal sector are contributing towards self-sufficiency and increased coal availability in the country. Coal production in the country is poised to reach new heights with the country already breaching 1 BT of coal production mark in 2024-25 and likely to grow beyond 1.5 BT by 2030. With the increased availability of domestic coal in the country, it is envisaged that there would be a paradigm shift towards a surplus coal scenario and resultantly the coal sales scenario is expected to undergo a major change from the existing mechanisms of coal sales channels, necessitating a major market reform backed by a Regulatory mechanism,” said the Coal Ministry in the draft note.

From framework concept to enforceable market rules

While the September 2025 draft primarily outlined the broad framework for establishing coal exchanges, the revised version substantially expands the rulebook governing how these platforms will operate, who can control them, and how trading behaviour will be policed.

One of the most notable changes is the detailed codification of market misconduct. The revised draft introduces explicit definitions of cartelisation, circular trading, insider trading and market manipulation — concepts that were either absent or only implicitly referenced in the earlier version. The rules now spell out how coordinated bidding, artificial price signals or misuse of unpublished price-sensitive information will be treated as regulatory violations.

This marks a clear shift from a facilitative approach in the September draft to a surveillance-driven market oversight model.

Stronger role for regulator, tighter complianceStronger role for regulator, tighter compliance

The revised draft also sharpens the role of the Coal Controller Organisation (CCO), designated as the authority to register and regulate coal exchanges. It explicitly empowers the regulator to oversee trading activity, levy fees, maintain data repositories and enforce grievance redressal mechanisms — provisions that were less detailed in the earlier consultation draft.

In addition, the December version mandates automated audit trails for all electronic transactions, ensuring time-stamped records of bid creation, modification and execution. This requirement was not explicitly stated in the September draft and is aimed at strengthening post-trade scrutiny and enforcement.

Ownership caps and governance structure clarified

Another key change is the tightening of ownership and governance norms for coal exchanges. The revised rules clearly cap individual member shareholding at five percent and aggregate member ownership at 49 percent, while also setting timelines for non-member shareholders to dilute holdings beyond specified thresholds.

The governance structure has also been more sharply defined, with requirements on board composition, independent directors and segregation of ownership from trading rights, reinforcing the principle of demutualisation that was outlined but not fully operationalised in the earlier draft.

Market design and price discovery formalised

The December draft also provides greater clarity on how coal prices will be discovered on exchanges. It mandates double-sided closed bid auctions and specifies that price discovery must maximise overall economic surplus.

Contract design, settlement mechanisms, quality verification through empanelled sampling agencies and adjustment of prices based on coal quality have all been more tightly specified in the revised draft.

The ministry has invited stakeholder comments on the revised draft within 30 days, indicating that further refinements may still follow before the rules are finalised.

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