- Introduced six new measures on 1 October to reduce market volatility.
- Measures include doubling and trebling index contract sizes to ₹15-20 lakh.
- Additional extreme 200-basis-point loss margin of 14 percent on selling contracts on expiration days.
- Only weekly expiries allowed for Nifty 50 and Sensex contracts from 20 November.
- Such rules aim at curtailing the trading options of the retail players with no experience regarding futures and options.
Option Premium Collection Measures
- Brokerages must collect premiums for options upfront.
- Elimination of calendar spread benefit on expiry days from 1 February 2025.
- Margin requirement to sell options on expiry days increases.
- The over-leveraged positions and stakes will be limited.
- Try to dissuade overly risky bets by institutional players and brokerages.
Retail investors’ influence of the new measures
- Increased risk for quick-win retail investors.
- Increased trading opportunities for minimum contract sizes worth ₹15-20 lakh.
- Higher capital requirement and hedging costs.
- Less trading opportunities cautions against options as a national pastime.
Effects on Brokerage Revenue
- Measures may hamper discount brokers like Zerodha, Groww, and Angel One.
- Larger lot sizes can discourage retail participation and may lower volumes.
- Removing volume-based discounts from the exchange could result in a rise in fees or product offerings.
- Curbs may reduce Sebi’s turnover-fee income.
Derivatives Market Impact in India
- India is the world’s largest derivatives market, with 80% of global index options traded on NSE.
- Expected to dip by 35-40% in order volume and premium turnover by 10-15% due to unease caused by Sebi.
- Kotak Securities’ digital business president Ashish Nanda predicts sustainable growth for the domestic derivatives market from 2025.
