• UGI USER
  • Jul 31, 2024
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INDEX DERIVATIVES: SEBI PROPOSES MEASURES TO CURB SPECULATIVE TRADING

Why In News

SEBI has proposed a series of measures to curb speculative trading in index derivatives, including futures and options, aimed at protecting investors and ensuring market stability.

About the News

  • Background:The proposals follow the Union Budget 2024-25 announcement to double the Securities Transaction Tax (STT) on the futures & options (F&O) segment, effective October 1, 2024, to check the rising trading volumes.
  • Trading Losses-In 2023-24, 92.50 lakh unique individuals and firms traded in the index derivatives segment, with 85% of them incurring a total trading loss of ₹51,689 crore.
  • Revised Contract Sizes:SEBI proposed to revise the minimum contract size for index derivatives. Initially, the minimum value would be set between ₹15 lakh to ₹20 lakh, increasing to ₹20 lakh to ₹30 lakh after six months.
  • Intraday Monitoring:Position limits for index derivative contracts will be monitored intraday by clearing corporations or stock exchanges to manage risks associated with derivatives.
  • Options Strikes Rationalization:The strike interval will be uniform up to a fixed percentage (4%) around the prevailing index price, and no more than 50 strikes should be introduced for a contract at launch.
  • Upfront Collection of Premiums:Trading members will be required to collect option premiums on an upfront basis from clients.
  • Margin Adjustments:To manage risks near expiry, SEBI proposed increasing margins by 3% the day before expiry and by an additional 5% on the expiry day itself.
  • SEBI Chairperson’s Statement:SEBI Chairperson Madhabi Puri Buch noted that households are losing up to ₹60,000 crore annually in the F&O segment, highlighting the importance of these proposed measures.