Tue Oct 01 16:21:03 UTC 2024: ## SEBI Tightens Grip on Equity Index Derivatives Market to Protect Investors

**Mumbai, India:** The Securities and Exchange Board of India (SEBI) has announced a series of new measures aimed at strengthening the equity index derivatives market and safeguarding investors. These measures, based on recommendations from the SEBI Expert Working Group and the Secondary Market Advisory Committee, will come into effect in phases starting November 2023 and February 2025.

One key change is the mandatory upfront collection of option premiums from buyers, a move designed to prevent excessive intraday leverage and promote market stability. This requirement, effective from February 2025, will be implemented by trading and clearing members.

To further minimize risks, SEBI will also remove calendar spread treatment on the expiry day of contracts, effective from February 2025. This aims to reduce basis risk, a common concern during high-volume trading days.

In response to the rise in speculative trading and volatile market behavior, SEBI is also implementing intraday monitoring of position limits in equity index derivatives from April 2025. Exchanges will take regular snapshots of positions to ensure compliance with permissible limits.

Additionally, the minimum contract size for index derivatives will increase to Rs. 15 lakh from November 20, 2023, to ensure participant suitability in the growing market.

To further curb speculative trading, exchanges will be restricted to offering weekly expiry derivatives contracts on only one benchmark index, also effective from November 20, 2023.

These changes, announced following SEBI’s board meeting, underscore the regulator’s commitment to promoting a fair and stable market environment. The measures are designed to address concerns raised by increasing retail participation, short-tenure index option contracts, and heightened speculative trading volumes, particularly on expiry days.

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