Stricter norms to curb speculative trading in F&O

To curb speculative trading, markets regulator Sebi on Tuesday put in place a stricter framework for equity index derivatives by increasing the minimum contract size and mandating upfront collection of option premiums.

Other measures announced by Sebi included intra-day monitoring of position limits, removal of calendar spread benefit on expiry day, rationalisation of weekly index derivatives and increased tail risk coverage. These measures, aimed at protecting investors and maintaining market stability, particularly in the high-risk environment of index options trading on expiry days, will become effective in a phased manner starting November 20, Sebi said in its circular. The framework comes days after Sebi came out with its study on Futures & Option (F&O) segment.

A recent Sebi study found that 93 per cent of over 1 crore individual traders in the F&O segment lost an average of around Rs 2 lakh each between FY22 and FY24.