Market regulator Sebi has announced a slew of measures to strengthen index derivative framework to protect investors and improve market stability, including reducing expiries to a weekly basis. Each exchange will be allowed to provide derivatives contracts for only one of its benchmark index with weekly expiry.
The regulator has rolled out these measures after taking into consideration the highly speculative nature of trading on index derivatives, particularly on expiry day of the contracts.
The Securities and Exchange Board of India (Sebi) has also increased the minimum trading amount for derivatives from the present Rs 5-10 lakhs to Rs 15 lakh when it is introduced in the market, which will then be increased fall between Rs 15 lakh and Rs 20 lakh. As the press release by the market regulator said, “the lot size shall be fixed in such a manner that the contract value of the derivative on the day of review is within Rs. 15 lakhs to Rs. 20 lakhs.”
The new norms for derivative trading will be rolled out in phases, starting November 20. Index derivative contracts with weekly expiries, increase in contract sizes and and increase in tail risk coverage by levying additional extreme loss margin (ELM) will be launched from that day.
From February 1, 2025, there will upfront collection of option premium from buyers and removal of calendar spread treatment on the expiry day. From April 1, 2025, there will be intraday monitoring of position limits.