Derivatives Trading Drops 38% in December After SEBI’s New Rules

In December, trading of derivatives on India’s major stock exchanges saw a significant decline. On the National Stock Exchange (NSE), the daily turnover for futures and options dropped by 38% compared to November. On the Bombay Stock Exchange (BSE), it fell by 19%. This decrease occurred in the first full month after the SEBI introduced new regulations aimed at limiting the surge in retail participation.

SEBI’s Crackdown on Derivatives

SEBI took action against the derivatives market after a rapid rise in trading led to large losses for retail investors. The regulator introduced stricter rules, such as reducing the number of weekly options available and increasing the minimum contract sizes. This came at a time when the NSE Nifty 50 Index posted its largest quarterly loss in over 2 years.

Upcoming Reforms

Additional reforms are expected to take effect soon. Starting February 1, brokers will be required to collect premiums upfront for options purchases. Also, traders will need to fully pay for their margins on calendar spreads by expiration days. On April 1, exchanges will begin monitoring position limits throughout the day.

About SEBI

SEBI is the regulator for the securities and commodity markets in India. It operates under the Ministry of Finance in the Government of India. SEBI was set up on April 12, 1988, as an executive body and gained legal powers on January 30, 1992, through the SEBI Act 1992.

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