Sebi may adopt all Padmanabhan committee measures to curb retail F&O frenzy

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Subscribe to enjoy similar stories. In an attempt to curb the retail euphoria in equity options, the capital markets regulator is likely to implement all seven measures recommended by the Padmanabhan committee at its board meeting on Monday, according to two persons aware of the matter.

The next step would involve implementing a product suitability framework (PSF) to discourage people with low income from trading in derivatives, one of the two persons quoted earlier said on condition of anonymity. “The concern stems from the rising number of individual investors with low-income trading despite suffering sustained losses." The measures, suggested by the panel chaired by G.

Padmanabhan, a former executive director of the Reserve Bank of India, include increasing the minimum lot size of derivatives contracts from ₹5-10 lakh to ₹15-20 lakh at introduction and ₹25 -30 lakh after six months, having just one index options expiry per week per exchange in place of the current five a week, and increasing extreme loss margins to trade a day before and on expiry days of options. The panel also recommended rationalizing option strike prices, collecting upfront margins from option buyers as well against only from sellers, removal of calendar spread benefit on expiry day and intraday monitoring of position limits.

Also read | The options exuberance is on; will Sebi panel fix more guard rails? A query sent to the Securities and Exchange Board of India (Sebi) remained unanswered. The panel’s recommendations made their way into a Sebi consultation paper, eliciting over 6,000 comments from brokers and market stakeholders last month.