Sebi Proposes Seven Key Changes To Curb Derivatives Trading Framework

Madhabi Puri Buch, Chairperson of the Securities and Exchange Board of India (SEBI), spoke at the "Indian Capital Markets: Transformative Shifts Achieved Through Technology and Reforms" event, announcing seven proposed amendments to the derivatives trading framework to enhance investor protection and market stability. Based on expert recommendations, SEBI aims to implement fewer options strike prices, upfront collection of options premiums, a significant increase in minimum contract sizes, and reduced weekly expiries. These changes address concerns over the rapid growth of the derivatives market, where daily turnover often exceeds Rs 400 trillion, causing significant losses for small investors. Buch highlighted that annual household savings losses of Rs 50,000-60,000 crore in derivatives are a macro concern, suggesting these funds could be more productively invested in IPOs or mutual funds. SEBI’s proposals could reduce trading volumes on NSE and BSE, impacting their profitability, as exchanges would limit options offerings to a single benchmark for weekly expiry and increase minimum contract sizes. Additional measures include higher contract margins near expiry, intraday position limit monitoring, rationalizing contract strikes, and eliminating calendar spread benefits on expiry day. Buch also emphasized the importance of Know-Your-Customer registration agencies (KRAs) in preventing market contamination, referencing issues with Paytm.