SEBI Likely To Begin Discussions On Derivatives Contracts Next Week

India’s capital markets regulator is expected to start discussions with stock exchanges within the next week regarding potential changes to the expiry dates of derivative contracts, according to news reports

The primary focus is on extending the duration of contracts beyond the current weekly expiries, aiming to reduce speculative trading and enhance market stability. Additionally, the Securities and Exchange Board of India (SEBI) is also considering aligning expiry dates across all exchanges to ease volatility.

SEBI Proposals

SEBI is also reportedly exploring ways to reduce the surging volumes in derivatives trading, aiming to bring the focus back to cash markets. One such proposal includes implementing entry barriers for retail investors, such as aptitude tests or net worth requirements, to ensure informed participation in the derivatives segment.

The Ministry of Finance has expressed concerns over the increased speculative trading on weekly expiries not contributing meaningfully to the broader economy.

SEBI’s proposals include shifting weekly options to bi-monthly or monthly expiries, increasing margin requirements for options, and lowering them for cash market trades.

Another proposal reportedly under review is to tweak the Securities Transaction Tax (STT). The proposal is to increase the STT on options to discourage excessive speculation, while reducing it for cash trades to promote healthier participation.

According to reports, data indicates that nearly 90% of retail traders incur losses on expiry days in index options trading.

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