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The Securities and Exchange Board of India (SEBI) has announced a series of new measures aimed at curbing speculative trading in the futures and options (F&O) segment, after data revealed that nine out of ten participants have consistently lost money over the past three years.
As part of the new regulations, SEBI has increased the minimum contract size in index derivatives from ₹5 lakh to ₹15 lakh. Additionally, the regulator has reduced the number of weekly index expiries to just one per exchange. This means that each exchange can now offer only one weekly expiry on a single benchmark index.
“In order to address the issue of excessive trading in index derivatives on expiry day, it has been decided to rationalize the number of index derivatives products with weekly expiries. Henceforth, each exchange may offer derivatives contracts for only one of its benchmark indices with a weekly expiry,” SEBI stated in its circular.
The move comes as a response to the heavy losses sustained by retail investors in the F&O segment. According to a recent study by SEBI, over the past three years, a staggering ₹1.81 lakh crore has been lost by 1.10 crore traders. Only 7% of traders have managed to make a profit.
With the implementation of this new circular, the size of derivatives contracts in benchmark indices such as Nifty and Sensex will increase, with the range moving from ₹5 lakh-₹10 lakh to ₹15 lakh-₹20 lakh. The new rules will take effect for all index derivatives contracts introduced after November 20, 2024.
India’s derivatives market has seen substantial growth in recent years. According to SEBI’s report, India’s derivatives market has now surpassed the cash market, accounting for 30% to 50% of global derivatives trading. The turnover in India’s cash market has doubled between FY20 and FY24, while the turnover of index options has surged 12-fold, reaching ₹138 lakh crore in FY24 from ₹11 lakh crore in FY20.
