The Securities and Exchange Board of India (Sebi) is expected to issue the final guidelines for derivatives trading by September-end, two sources in the know told FE, adding that the norms are likely to be the same as proposed in the draft circular.
The markets regulator has received thousands of suggestions from interested parties on the draft circular till August 20 — the deadline for sending comments. However, while the suggestions to the consultation paper are being reviewed, the sources said the proposals included in the draft circular will not be modified.
“Sebi is likely to go through the suggestions in the next 10 days, call for a meeting and implement the new guidelines,” one of the sources said. The suggestions will first go to the Secondary Market Advisory Committee and then to Sebi board, which will likely meet in September.
The sources also said that there is a likelihood that on October 1, when the higher securities transaction tax (STT) on futures and options trading takes effect, Sebi’s regulations will also come into force.
The regulator had issued a consultation paper on July 30 with seven proposals aimed at curbing the hyperactive trading activity in the options segment on expiry day and increasing the minimum contract size requirement.
Some of the proposals include increasing the minimum value of derivatives contract to `15-20 lakh immediately and then to `20-30 lakh after six months, limiting the weekly options contract to single benchmark index of an exchange, and higher margins on expiry day and a day before that.
This will not only make it harder for smaller investors to trade in the futures and options segment but also impact the revenue for exchanges and brokerage firms, according to experts.
The regulator has been ringing alarm bells for over a year on the surge in retail trading volume in the derivatives segment. Apart from Sebi, finance minister Nirmala Sitharaman and the Reserve Bank of India (RBI), too, have voiced their concerns on the issue.
Sebi has pointed out that while the cash market annual turnover increased by just over two times between FY20 and FY24, the index options’ annual turnover on a premium basis has risen by over 12 times.
On top of this, the markets regulator said 89% of individual traders lose money in equity derivatives trading. In its consultation paper, Sebi said 9.2 million unique individuals and proprietorship firms traded in the index derivatives segment of the NSE in FY24 and cumulatively incurred a loss of `51,689 crore, which excludes transaction costs.
