Tue Oct 01 23:57:18 UTC 2024: ## SEBI to Take Action on F&O Segment, Urges Tax Breaks for Municipal Bonds

**New Delhi, October 2, 2024:** The Securities and Exchange Board of India (SEBI) is set to implement measures in the Futures and Options (F&O) segment to enhance investor protection, a senior official announced on Tuesday. These measures are expected to come into effect soon, following a recent study on the F&O market conducted by SEBI.

The regulator has also urged the government to provide tax breaks for subscribers of municipal bonds. SEBI believes these bonds are crucial for funding infrastructure development and will advocate for this tax break during a meeting with the Finance Commission.

SEBI’s recent consultation paper proposes seven measures to tighten regulations for index derivatives. These include revisions to the minimum contract size, upfront collection of option premiums, intra-day monitoring of position limits, and rationalization of strike prices. The regulator also suggests removing the calendar spread benefit on expiry day and increasing margins for near-contract expiry.

These proposed changes aim to improve risk management and increase transparency within the derivatives market. The minimum contract size for index derivatives will be increased in two phases, starting with a range of ₹15 lakh to ₹20 lakh. After six months, the minimum contract size will further increase to between ₹20 lakh and ₹30 lakh.

SEBI’s recent study highlighted the significant losses incurred by individual F&O traders. Data revealed that 93% of over 1 crore individual traders suffered average losses of around ₹2 lakh per trader between FY22 and FY24, resulting in aggregate losses exceeding ₹1.8 lakh crore over the three-year period. The report also indicated an increase in the number of loss-making individual investors in F&O compared to FY22.

The implementation of SEBI’s proposed measures and the possible introduction of tax breaks for municipal bonds are expected to have a significant impact on the Indian financial markets.

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