Published Online:September 2024
Product Name:The IUP Journal of Financial Risk Management
Product Type:Article
Product Code:IJFRM020924
Author Name:Sujitha Gunnam, Veda Varun and VDMV Lakshmi
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:25-37
The Securities and Exchange Board of India (SEBI) has issued new regulations for the derivatives market to improve transparency, bring stability, and ensure investor protection. This paper gives an overview of these measures which include raising the minimum trading lot size, reducing weekly expiry contracts, imposing higher margins on expiry days, enforcing upfront premium collection for long options, eliminating calendar spread advantages on expiry, and strengthening intraday position monitoring. The restrictions seek to reduce speculative trading, particularly on expiry days, and discourage uninformed investment decisions by the retail investors, as many of them have suffered considerable losses. While these reforms may cause short-term problems, such as increased costs and fewer trading opportunities, they are likely to result in a more robust and efficient derivatives market. The framework may reduce retail involvement due to rising capital requirements by encouraging professional trading and complying with global norms. However, the long-term advantages, such as enhanced market integrity, lower volatility, and increased investor confidence, indicate SEBI’s commitment to building a strong and sustainable financial environment.
India’s stock market regulator, the Securities and Exchange Board of India (SEBI), has been periodically updating regulations pertaining to futures and options (F&O) segment to bring transparency, price discovery, market stability, risk management and adequate liquidity, while ensuring investors’ protection and systematic development of the market.