SEBI Tightens Rules for Equity Index Derivatives to Curb Speculative Trading

The Securities and Exchange Board of India (SEBI) has introduced stricter regulations for equity index derivatives. Measures include increasing the minimum contract size, upfront collection of option premiums, and intra-day monitoring. These actions are in response to significant trader losses and aim to stabilize the market and protect investors.

In a decisive move to clamp down on speculative trading, SEBI on Tuesday unveiled a more stringent framework for equity index derivatives. The financial watchdog raised the minimum contract size and mandated upfront collection of option premiums among other measures.

SEBI also introduced intra-day monitoring of position limits, eliminated calendar spread benefits on expiry days, rationalized weekly index derivatives, and increased tail risk coverage. These measures aim to offer better protection for investors, particularly in the volatile environment of index options trading on expiry days.

The new framework, set to roll out from November 20, follows a recent SEBI study indicating that 93% of over 1 crore individual traders in the F&O segment incurred significant losses between FY22 and FY24. SEBI's rigorous actions include increasing the minimum contract size to Rs 15-20 lakh and imposing additional margins on short options contracts among other stipulations.

(With inputs from agencies.)