Is SEBI on the to crackdown speculative trading ?
market regulator Securities and Exchange Board of India (SEBI) has proposed a series of near-term rules to prevent speculative activities in trading. specially in index derivatives, as daily option expiry coming from the exchanges. The few measures suggested by the market watchdog are aimed to curb market speculation, enhancing investor protection and ensuring greater market stability.
According to report, around 92 lac traders have lost in FY 23-24 in F&O trades. The total lost amount is ~51,000 crore ( nearly equal to 30-40 countries’ GDP). Regulator is worried about younger retail trades is transferring their saving to the trading in the derivatives segment.
Experts are assuming that SEBI may take some steps to safeguard retail traders.
Regulators are trying to protect investors and traders and they may implicates new rules
- daily expiring many reduce to one expiry in a week per exchange.
- SEBI may increase amount of lot size which is currently 5-10 lac to 10-15 lac in first phase and 15-20 lac i second phase.
- Strike interval should be uniform near the prevailing index price (4% around prevailing price) and the interval to increase as the strikes move away from prevailing price (around 4% to 8%), it said.
- Due to high implicit leverage in options contracts near expiry, which creates a high risk on a notional basis for entities dealing in options, SEBI proposed increasing the Extreme Loss Margin (ELM) by 3% to 5%.
Finance Minister Nirmala Sitharaman announced a significant hike in the the securities transaction tax (STT). which is from 0.01 per cent to 0.02 per cent while presenting Union Budget 2024. This means that equity and index traders will face double the tax on their trades involved in futures and options (F&O) transactions, once the proposal comes into effect, i.e., from October 1, 2024.
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