The Securities and Exchange Board of India (Sebi) has proposed significant changes to the derivatives trading framework to enhance investor protection and market stability. These changes come in response to concerns about the rapid growth of the derivatives market and substantial losses incurred by small investors. The proposed changes include reducing option strike prices, collecting options premiums upfront, tripling minimum contract sizes, and limiting weekly expiries. Sebi’s recommendations are aimed at curbing speculative trading and addressing the macroeconomic impact of substantial losses on household savings.
5 Major Key Points:
- Reduction in Option Strike Prices and Weekly Expiries: Sebi proposes fewer option strike prices and a limit on weekly expiries to reduce speculative trading and stabilize the market.
- Increase in Minimum Contract Size: The minimum contract size will be raised from Rs 5 lakh to Rs 15-20 lakh, which will be further increased after six months.
- Upfront Collection of Options Premiums: Options premiums will need to be collected upfront from buyers, aiming to reduce speculative risks.
- Impact on Exchanges and Brokers: The proposed changes may decrease trading volumes and profitability for exchanges like NSE and impact brokers who are already facing regulatory pressures.
- Focus on Investor Protection: The proposals address concerns about excessive losses by small investors and aim to improve market stability by reducing speculative activities.
