Markets regulator Securities and Exchange Board of India (SEBI) will tighten derivative rules to increase entry barriers and make it more expensive to trade as it tries to limit retail investors speculating on risky contracts.
SEBI will limit the number of options contract expiries to one per exchange a week and nearly triple the minimum trading amount in rules similar to those proposed in July despite pushback from traders and brokers, Reuters reported.
The regulator will review some of its earlier proposals to increase margin requirements and to monitor intraday trading positions, it added. Authorities have been flagging risks from speculative trading by retail investors, who have been funnelling savings into India's booming options market.
The monthly notional value of derivatives traded was Rs 10.92 lakh crore ($130.13 trillion) in August - the highest globally, data showed. The largest share of trading is in options contracts linked to stock indices like BSE Sensex and NSE Nifty 50.
SEBI will also raise the minimum trading amount to nearly Rs 15 lakh to Rs 20 lakh ($18,000-$24,000) as proposed in the July consultation paper from Rs 500,000, Reuters report added. The final rules will ask exchanges to reduce the number of contract expiries to one a week per exchange from multiple expiries currently that give traders the opportunity to speculate more, it added.
SEBI has rolled out stringent new eligibility criteria for stocks trading in the Futures and Options (F&O) segment. This overhaul, effective immediately, is designed to ensure that only high-quality stocks with robust market depth remain in this segment, thereby reducing the risks of market manipulation and heightened volatility.
Concerns over market manipulation and the inclusion of stocks with insufficient market depth have prompted SEBI to act. The revised guidelines aim to address these concerns by tightening the eligibility criteria for stocks entering or remaining in the F&O segment.
One of the most significant changes in the new guidelines is the revision of the stock's Median Quarter Sigma Order Size (MQSOS), a key metric used to gauge the average order size in the market. The MQSOS threshold has been increased from Rs 25 lakh to Rs 75 lakh.
Another critical change involves the Market-Wide Position Limit (MWPL), which has been tripled from Rs 500 crore to Rs 1,500 crore. Additionally, the Average Daily Delivery Value in the cash market has seen a steep increase from Rs 10 crore to Rs 35 crore.