SEBI's New Derivatives Market Rules for 2024-2025
SEBI introduces comprehensive changes to India's derivatives market, effective from October 2024. These new rules aim to enhance investor protection and market stability through various measures.
RI
by RA ALOK DAIYA SEBI Reg. INH000011468
BSE Enlistment No. 5737
Increased Contract Size
Current Range
Minimum trading amount for derivatives currently stands at ₹5–10 lakh.
New Threshold
SEBI raises the minimum trading amount to ₹15 lakh from October 1, 2024.
Objective
This change ensures investors take on appropriate risks in the derivatives market.
Reduction of Weekly Expiries
From November 20, 2024, SEBI will limit weekly expiries for index derivative contracts. Each exchange will offer only one expiry per benchmark index. This change aims to curb speculative trading and reduce risks associated with uncovered option selling.
Higher Margin Requirements
1
Current Scenario
Existing margin requirements may not fully protect against extreme market fluctuations.
2
New Measure
Additional 2% extreme loss margin (ELM) for all open short options on expiry day.
3
Implementation
The new ELM requirement will be effective from October 1, 2024.
Upfront Collection of Premiums
Starting February 1, 2025, brokers must collect option premiums upfront. This shift discourages excessive intraday leverage among investors. It ensures sufficient collateral to cover positions. The change aligns with SEBI's goal of reducing speculative trading.
Removal of Calendar Spread Benefits
Current Practice
Investors use calendar spreads to offset positions across different expiries on the same day.
New Rule
SEBI eliminates calendar spread benefits for contracts expiring on the same day.
Impact
This change aims to reduce speculative trading, particularly on expiry days.
Intraday Monitoring of Position Limits
From April 1, 2025, stock exchanges will monitor position limits for equity index derivatives intraday. This enhances market stability by preventing excessive speculative positions. Traders must adhere to these limits throughout the trading session.
Impact on Market Participants
1
Retail Investors
Higher entry barriers may reduce participation but offer better protection against market volatility.
2
Institutional Traders
Adjustments to trading strategies required to comply with new expiry and margin rules.
3
Brokers
Implementation of new systems for upfront premium collection and intraday position monitoring.
"Acceptance is the New Wisdom"
- Alok Daiya
Embrace Reality
Acceptance begins with acknowledging the present moment, warts and all. It's about letting go of resistance to what is, and finding peace in the now.
Cultivate Inner Peace
Acceptance allows us to release the grip of negativity, anxiety, and suffering. It empowers us to live with greater clarity and calm, fostering a sense of inner peace and wellbeing.
Unlock Wisdom
By accepting what is, we open ourselves to learning and growth. We gain the ability to see situations with fresh perspective and make choices that align with our true values.