Sebi proposes measures to curb rise in speculative trading in index derivatives
equity derivatives, while they will have fewer contracts to bet on. The Securities and Exchange Board of India (Sebi) has proposed an increase in minimum contract size in index derivatives, a reduction in weekly index product offerings, and making options trading costlier among a slew of proposals aimed at curbing heightened risky speculation among individual investors — mainly retail.
CONTRACT SIZE
Sebi has proposed to increase the minimum contract size for index derivatives such as Nifty and Sensex to up to ₹30 lakh from the existing ₹5-10 lakh. This will be done in a phased manner; to start with ₹15 lakh to ₹20 lakh and after six months, ₹20 lakh to ₹30 lakh.
«Given the inherently higher risk in derivatives and the large amount of implicit leverage, increase in minimum contract size would result in reverse sachetization of such risk bearing products,» Sebi said.
The current minimum contract size of ₹5 lakh to ₹10 lakh was last set in 2015. During the last nine years, the benchmark indices have gone up nearly three times.
«We see the retail traders being discouraged by the increased lot size because contracts will become out of their reach,» said Chandan Taparia, head of technicals and derivatives research at Motilal Oswal Financial Services.
The plan to tighten activity in futures & options is aimed at bringing down derivatives market turnover, which has significantly surpassed cash market turnover. Indian markets account for 30% to 50% of global exchange-traded derivative trades, Sebi said in a discussion
