SEBI Weighing Curbs On Options Trading Volumes And Boosting Cash Market Activity
The Secondary Market Advisory Committee of SEBI is likely to meet on August 19 to deliberate further on this issue.
The Securities and Exchange Board of India (SEBI) is actively considering steps to reduce the surging volumes in options trading and shift focus back to the cash market, people in the know told NDTV Profit.
A key committee of the regulator is scheduled to meet on August 19 to discuss a set of measures aimed at this objective, Profit was told.
One of the proposals on the table is to replace the current weekly expiry cycle for derivatives with fortnightly or monthly expiries. SEBI believes weekly expiries contribute significantly to short-term volatility in the markets and may be distorting price discovery.
In parallel, the regulator is exploring steps to incentivise greater participation in the cash market. This includes a possible recommendation for reduction in securities transaction tax (STT) and lower margin requirements for trades in the cash segment. This suggestion is to be explored with the Finance Ministry and the regulator alone cannot act on such a decision, the people quoted above explained.
The committee’s recommendations will form the basis for potential regulatory changes in the coming months, as SEBI looks to rebalance market activity and curb speculative trading patterns.
NDTV Profit had previously reported that while retail participation in index options on expiry days has slightly declined in recent times, an overwhelming majority—nearly 90%—of these retail traders still end up losing money.
Concerns remain about the high concentration of trading activity in short-term expiries and a growing trend of speculative short-term trades, the sources added.
The regulator recently also moved towards a delta-based open interest metric instead of the traditional notional method. This approach accounts for the actual economic exposure of options trades rather than their notional size, which can be misleading.
Apart from this, the regulator has also allowed a net end of the day limit of Rs 1,500 crore and a gross limit of Rs 10,000 crore (each side) for Index Options, they hinted. As per the previous proposal of the regulator, the net end-of-day limit was Rs 500 crore, only with a gross limit of Rs 1,500 crore.
