stock-broking-firms-fall-as-sebi-tightens-f-o-norms

Stock broking firms fall as Sebi tightens F&O norms

Shares of several stockbroking firms fell on Thursday, with SMC Global Securities dropping 4.29%, Aditya Birla Money 3.50%, 5paisa Capital 2.91%, ICICI Securities 2.38%, and IIFL Securities 2.16%, following Sebi's tightening of the F&O framework to curb speculative trading.

News Arena Network - New Delhi - UPDATED: October 3, 2024, 07:29 PM - 2 min read

Stock broking firms fall as Sebi tightens F&O norms

Shares of a large number of stock broking firms declined on Thursday amid markets regulator Sebi tightening F&O framework to curb speculative trading.

A broad sell-off hit shares of stockbroking firms on Thursday after India's market regulator, the Securities and Exchange Board of India (Sebi), announced tighter rules on futures and options (F&O) trading to curb speculative activity.

Among the hardest-hit were SMC Global Securities, which fell 4.29%, Aditya Birla Money, down 3.50%, and 5paisa Capital, which dropped 2.91%. ICICI Securities and IIFL Securities also saw declines, dipping 2.38% and 2.16% respectively on the BSE.

"New Sebi regulations for the F&O segment have raised concerns about reduced trading volumes in the broader market," said Vinod Nair, Head of Research at Geojit Financial Services.

The changes, announced Tuesday, include a stricter framework for equity index derivatives trading. Sebi increased the minimum contract size and mandated the upfront collection of option premiums in a bid to limit speculative trading.

Additional measures include intra-day monitoring of position limits, removal of calendar spread benefits on expiry days, and the rationalisation of weekly index derivatives. Tail risk coverage will also be expanded. These reforms will take effect in phases, starting on 20 November.

The new rules follow a Sebi study on F&O trading, which found that 93% of more than 1 crore individual traders in the segment lost an average of ₹2 lakh each between FY22 and FY24, with total losses exceeding ₹1.8 lakh crore.

In an effort to better align with market growth, Sebi increased the minimum contract size for index derivatives to ₹15-20 lakh, up from ₹5-10 lakh.

"A derivative contract shall have a value not less than ₹15 lakh at the time of its introduction in the market," Sebi said in a circular, adding that the lot size would be reviewed to ensure it stays between ₹15 lakh and ₹20 lakh.

To further limit speculative trading, Sebi will allow exchanges to offer weekly expiry derivatives for only one benchmark index.

Thursday’s announcement weighed on broader equity markets as well. The BSE Sensex plunged 1,769.19 points, or 2.10%, to close at 82,497.10, while the NSE Nifty slid 546.80 points, or 2.12%, to end at 25,250.10.