Market regulator Sebi rolls out 6 measures to rein in F&O speculation

In response, the markets regulator issued a session paper in July outlining the proposed measures, which had been subsequently reviewed by an professional working group and the secondary market advisory committee.

The measures introduced on Tuesday are geared toward elevating the entry obstacles for retail contributors and can be applied in phases, with three of the six adjustments set to take impact from November 20.

“It has been determined {that a} by-product contract shall have a worth not lower than Rs 15 lakh on the time of its introduction out there. Additional, the lot measurement shall be mounted in such a fashion that the contract worth of the by-product on the day of evaluate is inside Rs 15 lakh to Rs 20 lakh,” stated Sebi within the round. This marks the primary revision of contract measurement in 9 years.

Relating to the limitation of weekly expiries per change to at least one benchmark, Sebi highlighted that the hyperactive buying and selling in index choices on expiry days poses dangers to investor safety and market stability with out offering any discernible advantages for capital formation. In consequence, the Nationwide Inventory Alternate (NSE) is anticipated to retain solely weekly expiries of Nifty, whereas its peer BSE could solely maintain weekly expiries for Sensex, thus eradicating the present development of 1 expiry every day.

Moreover, Sebi will impose an extra excessive loss margin (ELM) of two per cent for brief choices contracts, efficient November 20. “This might be relevant for all open quick choices initially of the day, as nicely on quick choices contracts initiated throughout the day which can be due for expiry on that day. For example, if weekly expiry on an index contract is on seventh of a month and different  weekly/month-to-month  expiries on the index are on 14th, twenty first and twenty eighth, then for all of the choices contracts expiring on seventh, there can be an extra ELM of two per cent on seventh,” famous Sebi.

The markets watchdog has additionally mandated that brokers (buying and selling members) gather possibility premiums upfront from patrons to forestall undue intraday leverage and discourage the observe of permitting positions that exceed the collateral on the dealer degree. Moreover, inventory exchanges have been instructed to watch place limits for fairness index derivatives on an intraday foundation, with these limits designed to forestall massive merchants from manipulating the market. This requirement can be efficient from April 2025.

Nonetheless, the proposal to rationalise possibility strikes didn’t make it into the ultimate round.

Sebi officers beforehand indicated that these adjustments are supposed as short-term measures, with the opportunity of extra steps to curb hypothesis being developed sooner or later. Earlier, the market regulator additionally revised the eligibility standards for inventory choice within the F&O phase.

First Revealed: Oct 01 2024 | 9:01 PM IST