SEBI tightens Future And Options Rules effective 20 November 2024 announces measures to get Indians rid of Addiction Of Derivatives Segment

Futures & Options Addiction: Stock market regulator SEBI has prepared to regulate Future & Options. SEBI has said that a new framework will be implemented to regulate high-risk futures and options. In F&O, the contract size will be increased from Rs 5-10 lakh to Rs 15 lakh and only one weekly expiry will be allowed on an exchange.

Strictness on F&O from 20th November

To strengthen the equity index derivatives framework, SEBI’s regulation on futures and options will be implemented in different phases from November 20, 2024. SEBI has proposed 6 rules to regulate futures and options trading. SEBI has proposed that option premium will be recovered upfront from the option buyer. This rule will come into effect from February 1, 2025. Also, there will be intraday monitoring of position limits from April 1, 2025.

Derivative contracts for only one index per week

There is a sharp surge in volume on the day of expiry in which the holding period is of a few minutes and considerable fluctuations in the value of the index are also seen throughout the day and on expiry. SEBI said, this will ensure investor safety and market stability. There is an impact on the capital, but there is no increase in the capital. Therefore, the regulator has mandated that each exchange will have derivative contracts for only one index in a week.

F&O traders are facing huge losses

Recently SEBI’s report has come according to which 1.13 crore traders trading in the Derivatives Segment i.e. Future and Options lost Rs 1.81 lakh crore. Investors have suffered a loss of Rs 75000 crore in the financial year 2023-24. SEBI said in its report that 1 crore loss-making traders, which is 92.8 percent of the total traders, have suffered a loss of Rs 2 lakh while trading in futures and options in the last three financial years. There are only 7.2 percent futures and options traders who have made profits during the last three financial years. Due to the losses being faced by investors in futures trading, Finance Minister Nirmala Sitharaman has increased the Securities Transaction Tax on futures and options trade, which will come into effect from October 1, 2024.

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