SEBI Tightens F&O Trading: Anuj Singhal on Market Impact

Stock Market News Overview: The Securities and Exchange Board of India (SEBI) has taken a significant step to regulate trading in the Futures and Options (F&O) segment. Key changes include a shift to a single weekly expiry per exchange each week and an increase in the minimum value of index futures contracts from Rs 5 lakh to Rs 15 lakh. This set of new regulations will roll out in phases starting November 20, and option buyers will face upfront premiums beginning February 1, 2025.

Key Changes Announced by SEBI

In a groundbreaking decision, SEBI has raised the minimum trading amount in the derivatives segment from the existing Rs 5-10 lakh to Rs 15 lakh. As the new rules are implemented, traders can expect this limit to reach Rs 15 lakh-20 lakh. The introduction of index derivative contracts with weekly expiry and an increase in contract sizes will commence on the same day of the new regulation’s implementation. Additionally, from February 1, 2025, the option premium will be deducted immediately from buyers, and the calendar spread treatment on expiry day will be eliminated. An important measure of intraday monitoring of position limits will also commence on April 1, 2025.

Projected Impact on the Market

Experts are pondering the effects of SEBI’s stringent measures on the overall market. Anuj Singhal, Managing Editor of CNBC-Awaaz, believes that the market was largely anticipating these changes from SEBI. He noted that the revised regulations are milder than many investors had feared. Singhal emphasized that reducing the number of expiry days from daily to weekly is a positive move, as the previous daily expiries tended to encourage speculation akin to gambling.

Singhal pointed out that the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) will now each have designated expiry days, resulting in a maximum of two expiries for Nifty and Bank Nifty contracts per month. He remarked that foreign hedge funds had been heavily capitalizing on the frequent expiries, a concern echoed by government officials who had raised alarms about the implications of daily expirations.

Commenting on the increased contract sizes, Singhal mentioned that while this may not pose significant challenges in index trading, it could complicate matters for individual stock contracts due to liquidity constraints. He concluded that SEBI’s reforms might aid in mitigating traders’ losses, with minimal immediate impact on the overall market landscape. However, market participants should closely monitor stocks associated with BSE and Angel One, as these may experience notable fluctuations in response to the new rules.

Summary of SEBI’s New Regulations