Blitz Bureau
NEW DELHI: The 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, said four sources with direct knowledge of the matter.
Sebi will limit the number of options contract expiries to one per exchange a week and nearly triple the minimum trading amount, the sources said, in rules similar to those proposed in July, despite pushback from traders and brokers.
But Sebi will review some of its earlier proposals to increase margin requirements and to monitor intraday trading positions, according to the sources.
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 10,923 trillion in August – the highest globally, data from the regulator showed. The largest share of trading is in options contracts linked to stock indices like BSE Sensex and NSE Nifty 50.
The share of individual investors in index options has risen to 41 per cent in the financial year ended March 2024 from 2 per cent six years earlier, regulatory data showed.
“A key objective was to put an end to the large and rising speculative volumes in index options contracts close to expiry,” said the first of the sources, who all declined to be identified as the decisions are not yet public.
“The regulator believes that this warrants additional measures both for small investor protection and for ensuring continued systemic stability,” the source added.
The final rules will be released this month through a circular, the sources said. The details have not been reported previously. Sebi did not respond immediately to a request for comment.
The steps follow an increase in tax on derivative transactions in July intended to reduce the participation of retail investors in the options market.
