Market regulator SEBI proposes tighter rules for derivatives trading on individual stocks

Market regulator SEBI is concerned about the increasing participation in the futures and options segment. The regulator feels that as more people enter the derivatives segment, the risk on them is also increasing. In such a situation, SEBI has proposed strict rules to reduce the risk.

Due to this, strict rules became necessary

These proposals of the Securities and Exchange Board of India (SEBI) are going to make trading in individual stock derivatives difficult. SEBI says that especially in view of the manifold increase in options trading in recent times, strict rules have become necessary to reduce the risk.

Earlier there were reports that the regulator may form a committee to control the emerging risks and review the stability of the market in view of the increasing activity of investors in the derivatives market.

Discussion paper on website

SEBI published a discussion paper on this matter on its website on Sunday. In the paper, the regulator has proposed that derivative deals of individual stocks should be accompanied by adequate liquidity and trading interest from market participants. Currently, such a system is only for derivative contracts of indexes.

In such a situation the risk increases

The regulator believes that if the underlying cash market of derivative deals is not deep enough and there are no proper position limits with leveraged derivatives, then there is a high chance of price manipulation in the market, high volatility and compromise with the safety of investors.

Deals in derivatives increased manifold

Market data shows that trading in the derivatives segment in India has increased manifold in the last few years. According to NSE, the notional value of index options traded during 2023-24 has more than doubled compared to a year ago. Options trading in the country has increased manifold in the last five years. Retail investors are mainly responsible for this.

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