{"id":15589,"date":"2024-06-18T12:03:20","date_gmt":"2024-06-18T06:33:20","guid":{"rendered":"https:\/\/bigbreakingwire.in\/sebi-considers-stricter-derivative-trading-rules-to-manage-explosive-growth-in-options-trading\/"},"modified":"2024-06-18T12:03:20","modified_gmt":"2024-06-18T06:33:20","slug":"sebi-considers-stricter-derivative-trading-rules-to-manage-explosive-growth-in-options-trading","status":"publish","type":"post","link":"https:\/\/bigbreakingwire.in\/sebi-considers-stricter-derivative-trading-rules-to-manage-explosive-growth-in-options-trading\/","title":{"rendered":"SEBI Considers Stricter Derivative Trading Rules to Manage Explosive Growth in Options Trading"},"content":{"rendered":"
<\/div>\n

India’s markets regulator, SEBI, is considering a series of adjustments to its derivative trading rules to manage risks from the rapid growth in options trading. Key points include:

1. Proposed Rule Changes:<\/strong>
\u00a0\u00a0\u00a0 – Higher Margins for Options Contracts: SEBI might increase margin requirements for trading options.
\u00a0\u00a0\u00a0 – Detailed Disclosures: Enhanced disclosure requirements for index and stock options contracts are being considered.
\u00a0\u00a0\u00a0 – Linking Options Trading to Cash Volumes: To limit open positions in less liquid stocks, options trading might be linked to underlying cash volumes.
\u00a0\u00a0\u00a0 – Flat Fees for Brokers: Exchanges could be asked to charge flat transaction fees to brokers, regardless of their turnover.
\u00a0\u00a0\u00a0 – Individual Stock Derivatives Rules: Tighter rules for derivatives linked to illiquid stocks may be implemented.

2. Reason for Changes:<\/strong>
\u00a0\u00a0\u00a0 – Retail Investor Participation: Retail investors have driven a significant increase in index and stock options trading.
\u00a0\u00a0\u00a0 – Explosive Growth: The notional value of index options traded in 2023-24 more than doubled to $907.09 trillion.
\u00a0\u00a0\u00a0 – Investor Protection: Concerns about future challenges for markets, investor sentiment, and household finances have been raised.

3. Regulatory and Government Concerns:<\/strong>
\u00a0\u00a0\u00a0 – Excessive Speculation and Manipulation: There is a need for appropriate risk disclosure and measures to prevent excessive speculation or manipulation.
\u00a0\u00a0\u00a0 – Ratio of Options to Cash Volumes: India’s options volumes are roughly four times the underlying cash trading volumes, compared to a global average of 5-15 times. This high ratio is a concern.
\u00a0\u00a0\u00a0 – Zero-Day Expiry Options: There are reservations about introducing zero-day expiry options contracts, as they are seen as purely speculative.
\u00a0\u00a0\u00a0 – Lot Sizes of Options Contracts: Increasing lot sizes may prevent very small investors from entering the market.

4. Market Data and Trends:<\/strong>
\u00a0\u00a0\u00a0 – Global and Indian Trading Statistics: Of the 108 billion options contracts traded worldwide in 2023, 78% were on Indian exchanges. Retail investors account for 35% of derivative trading in India.
\u00a0\u00a0\u00a0 – Retail Investor Activity: In April, 78% of trades on the National Stock Exchange were by investors trading less than 1 million rupees ($11,969).

5. Public Consultation and Implementation:<\/strong>
\u00a0\u00a0\u00a0 – Discussion Stage: The proposed changes are currently in the discussion phase and will be open for public consultation before being implemented.

6. Legal and Foreign Participation:<\/strong>
\u00a0\u00a0\u00a0 – Legal Disputes: U.S.-based firms Jane Street and Millennium are involved in a legal dispute over an India options strategy, with Jane Street claiming significant revenue from the strategy in 2023.
\u00a0\u00a0\u00a0
7. Official Comments:<\/strong>
\u00a0\u00a0\u00a0 – Pending Responses: Emails sent to SEBI and India’s finance ministry seeking comments have not yet been answered.

8. Expert Opinions:<\/strong>
\u00a0\u00a0\u00a0 – Will Acworth, FIA: The primary concern for the government and SEBI is investor protection, as buying options without understanding them is akin to gambling.<\/p>\n","protected":false},"excerpt":{"rendered":"

India’s markets regulator, SEBI, is considering a series of adjustments to its derivative trading rules to manage risks from the rapid growth in options trading.…<\/p>\n","protected":false},"author":1,"featured_media":15588,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[65,618,616,619],"tags":[4330,4328,4320,4323,3139,4329,4322,4324,69,4331,4326,4334,4327,4321,1431,249,4332,4325,4335,4333],"class_list":["post-15589","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-bigbreakingnow","category-brokerage-reports","category-stock-in-news","category-stocks-in-news","tag-brokers","tag-cash-volumes","tag-derivative-trading","tag-detailed-disclosures","tag-financial-markets","tag-flat-fees","tag-higher-margins","tag-index-options","tag-india","tag-individual-stock-derivatives","tag-investor-protection","tag-lot-sizes","tag-market-regulation","tag-options-trading","tag-retail-investors","tag-sebi","tag-speculative-trading","tag-stock-options","tag-trading-rules","tag-zero-day-expiry-options","entry","rows"],"jetpack_publicize_connections":[],"modified_by":null,"jetpack_featured_media_url":"https:\/\/bigbreakingwire.in\/wp-content\/uploads\/2024\/06\/images28129.jpeg","jetpack_shortlink":"https:\/\/wp.me\/pfgCxS-43r","jetpack_sharing_enabled":true,"jetpack_likes_enabled":false,"_links":{"self":[{"href":"https:\/\/bigbreakingwire.in\/wp-json\/wp\/v2\/posts\/15589","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bigbreakingwire.in\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bigbreakingwire.in\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bigbreakingwire.in\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bigbreakingwire.in\/wp-json\/wp\/v2\/comments?post=15589"}],"version-history":[{"count":0,"href":"https:\/\/bigbreakingwire.in\/wp-json\/wp\/v2\/posts\/15589\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bigbreakingwire.in\/wp-json\/wp\/v2\/media\/15588"}],"wp:attachment":[{"href":"https:\/\/bigbreakingwire.in\/wp-json\/wp\/v2\/media?parent=15589"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bigbreakingwire.in\/wp-json\/wp\/v2\/categories?post=15589"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bigbreakingwire.in\/wp-json\/wp\/v2\/tags?post=15589"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}