Tue Oct 01 11:36:21 UTC 2024: ## SEBI Holds Back on F&O Rule Changes, Relief for Markets – But Only Temporary

**Mumbai, Oct 1, 2024:** The Securities and Exchange Board of India (SEBI) has deferred a decision on proposed changes to the Futures and Options (F&O) market rules, bringing temporary relief to stock markets. However, the reprieve is likely short-lived, as SEBI’s stance on the increasing volume of F&O trading remains unchanged. The market regulator is expected to soon release a draft circular outlining new regulations for derivative trading.

Sources close to the matter have confirmed that the draft for the new derivatives regulations will not require approval from SEBI’s board. Earlier, there were speculations that the new F&O rules could be implemented at the board meeting on September 30. However, the board decided against making a decision at this time.

SEBI had been considering changes to F&O trading rules since July, prompted by concerns about the increasing participation of retail traders in the market, particularly after the COVID-19 pandemic. Several SEBI reports have highlighted the disproportionate losses faced by retail investors in F&O trading. A recent study indicated that 93% of retail participants experienced losses in the past three years, totaling ₹1.8 lakh crore.

SEBI’s proposed changes aim to protect retail investors from such losses. The proposed regulations include increasing the minimum contract size for index derivatives to ₹15-20 lakh initially, later rising to ₹20-30 lakh. SEBI also intends to reduce the number of weekly options contracts, introduce a single benchmark index on stock exchanges, and raise the extreme loss margin (ELM) before expiry.

The new regulations are expected to have a significant impact on the stock market’s liquidity. While the decision to postpone the implementation of the new rules has provided immediate relief, the markets remain apprehensive about the potential for drastic changes in the future.

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