Securities Exchange Board of India i.e. SEBI has issued a new circular regarding Futures and Options (F&O). According to the circular, SEBI's new rules related to F&O will come into effect from November 20. From February 1, option buyers will be charged upfront premium and intra-day position limits will also be monitored.
Also, the value of index future contract i.e. contract size for index derivatives has been increased to a minimum of Rs 15 lakh. After this the value will gradually be increased to Rs 20 lakh. Presently it ranges from Rs 5 lakh to Rs 10 lakh. SEBI has also tightened the derivatives framework. Index option buyers will be charged an upfront option premium.
The exchange will have weekly expiry on the same day
According to SEBI, the new rules of Futures and Options will be implemented in several phases from November 20. An additional margin of 2% will be charged for short option contracts on the day of option expiry. There will be weekly expiry of exchange only on one day every week.
Intraday monitoring of position limits will begin from April 1, 2025
Intraday monitoring of position limits will take place from April 1, 2025. Upfront collection of option premium and increased margin will be applicable from February 2025. There will be no benefit of calendar spread on the expiry day. Full upfront margin will be charged to option buyers. There will also be intraday monitoring of positions.
Why did SEBI implement new rules?
The derivatives market is quite risky. At present, SEBI's concern is that the stake of retail investors is increasing in it. SEBI believes that investors are coming into this because they expect to get very high profits from here.
However, most of such investors do not have an understanding of the derivatives market. The objective behind increasing the limits by SEBI is that only such investors who think seriously about the market should enter the derivatives market.
What are futures and options?
Futures and Options (F&O) are a type of financial instruments that allow an investor to take large positions in stocks, commodities, currencies with less capital. Futures and options are a type of derivative contracts that have a fixed duration.
Within this time frame, their prices change according to the stock price. Futures and options on each share are available in one lot size.
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