Markets regulator SEBI has issued new rules to tighten trading in the futures and options segment with an eye on safeguarding the interest of small investors.
SEBI issues new F&O trading rules. (Photo credit: depositphotos)
Mumbai: Markets regulator SEBI on Tuesday shared new F&) rules that will come into effect in a staggered manner. The rules are meant to ensure that small investors’ interests s are safeguarded in a trading segment that is dominated by algo-based and institutional traders.
The markets regulator has made it mandatory for exchanges to raise the tail risk coverage on options expiry day, rationalise products linked to weekly index derivatives, and laid down rules for the contract size of derivatives. These rules will come into effect from November 20, 2024.
From April 1, 2025, SEBi has made it mandatory for the introduction of intraday monitoring of position limits. From February 1, 2025, it will be mandatory to have an upfront collection of option premiums for buyers as well as the removal of calendar spread treatment on the date of expiry, according to a SEBI notification.
What is the minimum trading amount for F&O
The minimum trading amount for futures and options has been raised to Rs 15 lakh from Rs 5-10 lakh at present
This will be gradually raised to Rs 20 lakh, SEBI said.
No more daily expiries
SEBI has made it imperative for exchanges to have expiries for just one index per week. This is aimed at curbing hyperactive trading on expiry day, which is highly volatile and speculative. This has no benefit in terms of capital formation but poses a risk to market stability and investor protection, Moneycontrol reported, citing the SEBI statement.
Higher margins needed
SEBI has made it mandatory for participants to deposit 2 per cent higher extreme loss margin to curb speculation on expiry day.
Calendar spread removed
SEBI has done away with offsetting of positions for contracts which are expiring on the same day. Again, this is meant to curb volatility in same-day expires. Investors will not be able to share their positions for contracts which are expiring the date of expiry.
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