SEBI Unveils New Rules for Equity Derivatives

In October 2024, SEBI introduced six new regulations aimed at enhancing market stability and protecting investors.

SEBI has recalibrated the minimum contract size for index derivatives to Rs 15 lakh from the current Rs 5-10 lakh, effective from November 20, to reduce speculation and limit small traders' participation in the market.
From February 2025, the upfront collection of options premium will be mandatory, ensuring end clients are not granted undue leverage, reducing the risk of defaults and speculative losses.
The regulator has restricted weekly index derivatives to a single benchmark per exchange, effective November 2023, to limit speculative trades and reduce market volatility during expiry days.
Exchanges will now be required to monitor position limits in real-time rather than just at the end of the day, starting April 2025, to prevent excessive speculative trading on expiry days.
The benefit of 'calendar spread' will no longer be available on expiry day from February 2025, encouraging earlier rollovers and reducing unwanted price fluctuations.
SEBI has increased tail risk coverage by imposing an additional 2% margin on short options contracts, protecting against significant market losses during volatile periods.