Sebi's six-step plan may shake up F&O volumes

Brokers warn of possible 30-40% decline in turnover

- KHUSHBOO TIWARI

The Securities and Exchange Board of India's (Sebi's) six-step plan to curb retail participation in speculative index derivatives may lead to a substantial drop in volumes - potentially by 30-40 per cent. These measures aim to reduce excessive speculation in the futures and options (F&O) segment, where daily turnover often exceeds ₹500 trillion and retail investors end up on the losing side of the trade more often.

Sebi has decided to increase the contract size from ₹5 lakh to ₹15 lakh, raising margin requirements and mandating the upfront collection of option premiums from buyers.

The new rules will also limit weekly expiries to one benchmark per exchange, bring intraday monitoring of position limits, and remove the calendar spread treatment on expiry days. The steps are to increase the entry barrier for retail investors whose losses have been mounting, according to a recent study by the watchdog.

Analysts had estimated that the curbs may bring down the volumes on the National Stock Exchange (NSE) by nearly one-third. In September, the average daily trading volume for the NSE's cash market segment stood at ₹394 trillion, while that of the BSE was around ₹144 trillion.