November 21, 2024
New Delhi, India
Key Highlights of SEBI’s New F&O Rules
The Securities and Exchange Board of India (SEBI) introduced significant reforms in the equity futures and options (F&O) segment to enhance market stability and protect retail investors. These rules, initially set for November 20, 2024, were implemented on November 21 due to a trading holiday.
Major Changes Introduced by SEBI
- Hike in Contract Sizes
- Contract value increased to ₹15–₹20 lakh (up from ₹5–₹10 lakh).
- Larger contracts mean traders require higher margins, reducing speculative trading.
- Weekly Expiry Rationalization
- Exchanges now limited to one weekly expiry per benchmark index.
- Aims to control excessive trading and reduce risks from naked option selling.
- Increased Margin Requirements
- An additional 2% Extreme Loss Margin (ELM) will apply to short options on expiry days.
- Enhances protection against sudden market fluctuations.
- Calendar Spread Removal
- Effective February 2025, calendar spread benefits on expiry day will be eliminated.
- Encourages early rollovers, reducing speculation on expiry days.
- Upfront Premium Collection
- From February 1, 2025, brokers must collect option premiums upfront.
- Discourages excessive leverage and ensures sufficient collateral coverage.
- Intraday Monitoring of Position Limits
- Starting April 1, 2025, position limits for equity index derivatives will be monitored intraday.
- Prevents unnoticed breaches of permissible limits.
Impact on Market Participants
- Retail Investors: Reduced speculative risks and increased protection.
- Brokers & Exchanges: Potential dip in trading volumes and revenue due to higher margins and stricter rules.
- Market Stability: Measures aim to curb excessive risk-taking and speculative trading practices.
SEBI’s Vision
These reforms underscore SEBI’s commitment to a more stable and transparent derivatives market, ensuring retail investors can trade responsibly without facing undue risks. As these rules unfold, they are expected to reshape trading behavior and foster a healthier market environment.
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