The Securities and Exchange Board of India (SEBI) has proposed a standardised framework for managing strike prices of options contracts, aimed at improving trading continuity and ease of doing business in derivatives markets. The move seeks to ensure that options contracts are always available close to prevailing market prices, especially during periods of sharp intraday volatility.
A strike price is the pre-determined price at which an options contract can be exercised. In its consultation paper, SEBI noted that inadequate availability of strike prices near the current market level can disrupt trading activity when prices move sharply, leaving participants without suitable contracts to trade.
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To address this, SEBI has proposed that stock exchanges put in place a comprehensive and transparent framework governing the introduction and management of strike prices. Exchanges will be required to maintain a minimum number of in-the-money and out-of-the-money options contracts, and conduct daily reviews to ensure adequate availability of strike prices around the prevailing market level.
A key element of the proposal is the mandatory intraday introduction of new strike prices in the direction of market movements. This means that if the price of the underlying asset moves sharply during trading hours, exchanges must introduce new strike prices in real time to keep trading aligned with market conditions. At the same time, exchanges will also need to periodically remove strike prices that are far away from the current market levels to ensure efficiency.
SEBI said the framework should be designed such that these changes do not require any system modifications for brokers or market participants during live market operations, limiting disruption to trading infrastructure.
The proposed rules will apply across equity, currency and commodity derivatives segments. Exchanges will have flexibility in designing the operational details, including strike intervals and the number of contracts, based on liquidity and participation in different segments.
The regulator has invited public comments on the proposal until June 15.
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