The Securities and Exchange Board of India (SEBI) on October 01, 2024, issued a circular regarding the Measures to Strengthen Equity Index Derivatives Framework for Increased Investor Protection and Market Stability.
To review the existing regulatory measures for investor protection while ensuring the orderly development and strengthening of equity derivatives market, as well as to identify measures to assist stock exchanges in carrying out their aforementioned core functions, SEBI formed an Expert Working Group (EWG) on derivatives, to suggest measures for investor protection and market stability.
Based on the measures recommended by the EWG and subsequent deliberations in the Secondary Market Advisory Committee (SMAC) of SEBI, a consultation paper was issued by SEBI on July 30, 2024, on the matter. The comments received were examined by SEBI, and the matter was further discussed with Stock Exchanges and Clearing Corporations, after which it was decided to, put in place the following measures to strengthen the equity index derivatives framework.
• Upfront collection of Option Premium from options buyers
• Removal of calendar spread treatment on the Expiry Day
• Intraday monitoring of position limits
• Contract size for index derivatives
• Rationalization of Weekly Index derivatives products
• Increase in tail risk coverage on the day of options expiry
[Circular No. SEBI/HO/MRD/TPD-1/P/CIR/2024/132]
