The Securities and Exchange Board of India (SEBI) is set to tighten derivative trading rules, increasing entry barriers and costs in a bid to limit retail investors from speculating on risky contracts.
Under the new regulations, SEBI will reduce the number of options contract expiries to one per exchange per week and nearly triple the minimum trading amount, according to a report by Reuters.
The changes are in line with proposals introduced in July, despite pushback from traders and brokers.
The market regulator is also reviewing earlier proposals aimed at increasing margin requirements and monitoring intraday trading positions.
Authorities have raised concerns over the risks of speculative trading by retail investors, who have been pouring savings into India's fast-growing options market.
In August, India saw the highest monthly notional value of derivatives traded globally at Rs 10.92 lakh crore ($130.13 trillion), data revealed. Most trading activity was concentrated in options contracts linked to key stock indices, such as the BSE Sensex and NSE Nifty 50.
SEBI will raise the minimum trading amount from Rs 500,000 to between Rs 15 lakh and Rs 20 lakh ($18,000-$24,000), as outlined in its July consultation paper, Reuters reported.
Additionally, exchanges will be required to reduce the number of contract expiries from multiple per week to just one, limiting opportunities for speculative trading.
In a broader move, SEBI has also introduced stricter eligibility criteria for stocks trading in the Futures and Options (F&O) segment, effective immediately.
The overhaul is intended to ensure only high-quality stocks with sufficient market depth remain in the segment, reducing the risks of market manipulation and volatility.
One of the key changes involves the revision of the Median Quarter Sigma Order Size (MQSOS) – a measure of average order size in the market – which has been increased from Rs 25 lakh to Rs 75 lakh.
SEBI has also tripled the Market-Wide Position Limit (MWPL) from Rs 500 crore to Rs 1,500 crore, while raising the Average Daily Delivery Value in the cash market from Rs 10 crore to Rs 35 crore.
These reforms come as part of SEBI's efforts to mitigate risks posed by speculative trading and improve market stability.
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