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Sebi has launched a set of six measures to strengthen the fairness index derivatives, also called F&O framework
SEBI Bhavan at BKC Bandra in Mumbai (PTI/ File Photo)
The Securities and Exchange Board of India (SEBI) has proposed six key measures to curb extreme hypothesis within the futures & choices (F&O) section, set to take impact on November 21, 2024. Originally deliberate to be carried out on November 20, 2024, the brand new guidelines will now come into power on November 21 resulting from a buying and selling vacation.
Based on suggestions from market individuals and after a evaluation by an professional working group and the secondary market advisory committee, Sebi has revised the minimal contract worth to Rs 15 lakh from the earlier vary of Rs 5–10 lakh. This adjustment will influence the Lot Size of newly launched F&O contracts, which can now fall inside the Rs 15–20 lakh vary.
Sebi’s October 1, 2024, round specifies that by-product contracts may have a minimal worth of Rs 15 lakh on the time of introduction, with the Lot Size mounted to make sure that the contract worth stays between Rs 15 lakh to Rs 20 lakh throughout opinions.
Key Changes in Derivatives Trading:
1. Reduction of Weekly Expiries
Starting at the moment, Sebi will cut back weekly expiries for index by-product contracts to at least one per benchmark index per change. This goals to curb speculative buying and selling and restrict dangers tied to uncovered or bare choice promoting.
2. Increased Contract Sizes
The minimal contract worth for derivatives will enhance from Rs 5-10 lakh to Rs 15 lakh, encouraging buyers to imagine extra applicable ranges of threat. Going ahead, the contract worth shall be adjusted to vary between Rs 15 lakh and Rs 20 lakh.
3. Higher Margin Requirements
To defend buyers from excessive market fluctuations, Sebi will impose a further excessive loss margin (ELM) of two% on all open quick choices at expiry. This will improve tail-risk protection, particularly throughout high-volume buying and selling intervals.
4. Upfront Collection of Premiums
Effective from February 1, 2025, brokers shall be required to gather choice premiums upfront. This change goals to discourage extreme intraday leverage and ensures buyers have enough collateral to cowl their positions.
5. Removal of Calendar Spread Benefits
The observe of calendar spreads—offsetting positions throughout totally different expiries—shall be eradicated for contracts expiring on the identical day. This transfer is meant to scale back speculative buying and selling on expiry days.
6. Intraday Monitoring of Position Limits
Starting April 1, 2025, inventory exchanges will start monitoring place limits for fairness index derivatives all through the buying and selling day. This will assist forestall merchants from exceeding place limits unnoticed.
Meanwhile, home inventory markets are closed at the moment in observance of the Maharashtra Assembly elections.
