Sebi plans tweaks to address derivative trading risks: Report
options trading.
The new rules could include higher margins for options contracts and more detailed disclosures, and are being considered after a series of meetings with exchanges, brokers, and fund houses over the past four months, the sources, with direct knowledge of the matter, said.
Both sources declined to be identified as they are not authorised to speak to the media.
Trading in index and stock options has soared in India in the last few years, fueled mainly by retail investors, sparking warnings from market participants and government officials. The notional value of index options traded more than doubled in 2023-24 to $907.09 trillion from the year before.
An unchecked explosion in retail trading of futures and options can create future challenges not just for the markets, but for investor sentiment and household finances, India's federal finance minister warned last month.
One source who is a regulatory official said there was a need for appropriate risk disclosure and steps to prevent excessive speculation or possible manipulation.
The first step the regulator is considering is a linking of options trading with underlying cash volumes in a stock, to contain the build-up of open positions in less liquid stocks, the sources said.
In cases where there is excessive build-up of options positions relative to cash volumes, the margin requirement for trading options would increase, they said.
Options volumes in India are roughly four-fold underlying cash trading volumes, whereas the global average ranges
