SEBI's circular for tightening rules for F&O trading

Trading Announcements
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In July, SEBI had released a consultation paper to tighten the rules for trading in the F&O segment on the back of a massive surge in speculation in the markets and to safeguard retail investors.

SEBI has now released a new circular on what all changes will be made and when these will come into effect.

Upfront collection of Option Premium from options buyers

To avoid undue intraday leverage to the end-client, and to discourage any practice of allowing any positions beyond the collateral at the end-client level, SEBI has decided that the upfront margin collection requirement from option buyers shall also include net options premium payable at the client level.

Applicability: Starting from February 01, 2025

Removal of calendar spread treatment on the Expiry Day

Considering the huge volumes witnessed on the expiry day as compared to future expiry days, and the enhanced risk that it represents, SEBI has decided that the benefit of offsetting positions across different expiries (‘calendar spread’) shall not be available on the day of expiry for contracts expiring on that day.

For example: Let us assume the monthly expiry is on the 29th (current month), 30th (next month), and 31st (far month) respectively, then calendar spread positions involving positions expiring on the 29th (current month) and 30th (next month), or 29th (current month) and 31st (far month), shall not be provided calendar spread treatment on 29th (current month expiry). However, calendar spread positions involving positions expiring on the 30th (next month) and 31st (far month) shall continue to receive calendar spread treatment on the 29th (current month expiry).

Applicability: February 01, 2025

Intraday monitoring of position limits

To address the risk of position creation beyond permissible limits, SEBI has decided that existing position limits for equity index derivatives shall also be monitored intra-day by exchanges. For this purpose, Stock Exchanges shall consider a minimum 4 position snapshots during the day.

Applicability: April 1st, 2025

Contract size for index derivatives

In 2015, SEBI set the value of Rs. 5 lakhs and Rs. 10 lakhs as a stipulated contract size for index derivative contracts.

Given that broad market values and prices have increased by around three times in the last 9 years, the lot size will be fixed in such a manner that the contract value of the derivative on the day of review is within Rs. 15 lakhs to Rs. 20 lakhs.

Applicability: Starting from November 20, 2024

Limiting Weekly Expiry Contracts:

Stock exchanges will only be allowed to offer weekly expiry contracts on one benchmark index.

Applicability: Starting from November 20, 2024

Additional risk coverage on Expiry day:

Keeping in view the heightened speculative activity around options positions on expiry days, SEBI has decided to increase the tail risk coverage by levying an additional ELM (Extreme Loss Margin) of 2% for short options contracts.

For instance, if weekly expiry on an index contract is on the 7th of the month and other weekly/monthly expiries on the index are on the 14th, 21st, and 28th then, for all the options contracts expiring on the 7th, there would be an additional ELM of 2% on 7th.

Applicability: November 20, 2024

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You can check the full circular here:

Interesting reads:

7 Likes
2

Does it mean randomly zerodha will say position limit reached ( max brokerwise oi nudge ) ?
Oh no!

3

Last I read the position limit at individual client level was 5% of contract-wise OI. If you happen to reach that scale then you’ll surely be able to afford NSE Alpha membership which will increase your limit to 15% of OI.

I don’t think any broker even as big as Zerodha will reach 15% of OI as total of its client’s net open positions

4

can any one tell me in simple terms what are the sebi changes

5

Can you please tell how would it affect the movement of market? Will Nifty Bank nifty not move in big range like 500-700 points?

6

instead of trading multiples of 1 lot, you will trade multiples of 3 lots :slightly_smiling_face:

slight increase in margins for sellers, weekly 2 expiries instead of 5

1 Like
7

Noooooooooo, zerodha is the first one to reach brokerwise oi limits

8

So the 1 lot sell option naked nearly 90 k if it 3 lot means

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this is the margin required …with far buy hedge for margin benefit

i was using the capital of 1.50Lk of trading after this effective rules date can i trade the 1.50lk capital or should we required more

Can any one tell me pls

9

What will happen is that scalpers, who used to trade in thousands of lots, will be forced out of the market. Regardless of market movements, in the recent past, the underlying asset didn’t show much movement, but far out-of-the-money (OTM) premiums fluctuated by as much as 1000% on expiry days. That has now been put to a stop for sure.

10

SEBI’s recent actions have clearly hit the mark, as evidenced by the fact that I receive 2-3 calls from “advice” providers during market hours. Previously, they would offer “calls,” but over the past few days, their language has shifted—they now claim to provide “levels” for index options :wink:

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@Meher_Smaran Regarding the Additional risk coverage on Expiry day , will extra margin be charged for OTM options as well ?
For eg i shorted a contract at 300 and on expiry it’s trading at 30, will extra charges be levied ?

12

Ok but still my question will Nifty Sensex and Bank nifty will show large movement just like yesterday it had a movement of 700 points downward. So will we see a big movement?

13

Why this random date 20 nov, could have done 1 dec or 1 nov

14

No one can predict with certainty except those who have insider information. If institutional buyers make large purchases or sales, significant movements in the market may occur. However, one thing is certain: artificial movements have been eliminated.

15

yeah shouldnt be of any concern afaik

16

can any one tell me in simple terms . what are the rules are changed

17

lot size will increase for index,one expiry in a week instead of everyday apart from this all will be almost same just like now

18

Can you please tell how would it affect the movement of market? Will Nifty Bank nifty not move in big range like 500-600 points?

19

thankyou
small doubt

  1. now the bank nifty naked sell is nearly 90,000 if lot size what the margin and how many lots will increase can you explain
20

From what I read the lot will increase from 25 to 75,margin required will be calculated after span and exposure calculation