SEBI Regulates Index Options Surge: Casino-Like Trading Concerns

Concerns are rising about the surge in retail interest in the derivatives market. Finance Minister Nirmala Sitharaman has increased the Securities Transaction Tax (STT) on futures and options, and SEBI has proposed changes to address this.

The focus is on significant investor losses in futures and options (F&O), with critics arguing that new measures could impact the broader derivatives market.

SEBI member Ananth Narayan G. compared the rapid increase in index options trading to a slot machine in a casino. Index options turnover rose over 12 times, from Rs 11 lakh crore in FY20 to Rs 138 lakh crore in FY24.

The surge is attributed to the proliferation of daily index option expiries, with over 90% of trading occurring on expiry days, often in the last trading hour.

NSE data shows 92 lakh individuals lost Rs 51,869 crore in index derivatives during FY24, excluding transaction costs.

SEBI's proposals include limiting weekly expiries, increasing margins, removing benefits of calendar spreads on expiry days, monitoring intraday positions, and rationalising option strikes.

The goal is to curb intense expiry-day trading without restricting broader trading and hedging activities. SEBI will continue to monitor the market and consider additional measures as needed.