What measures has Sebi introduced?

• 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.

• 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.