SEBI F&O Trading Regulations 2024: What Traders Need to Know

Securities and Exchange Board of India (SEBI) has introduced stricter regulations for futures and options (F&O) trading.

The updated guidelines are designed to foster a more transparent, stable, and trader friendly F&O trading environment while minimizing unnecessary risks for market participants.

Everything About SEBI’s New Regulations for F&O Trading: Timeline and Impact

This article breaks down the updated F&O trading norms and their impact on individual traders.

Discontinuation of Weekly Index Derivatives Contracts: Key Updates from NSE and BSE

The National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) have announced significant changes regarding weekly index derivatives contracts.

Starting November 20, 2024, each exchange will offer weekly derivatives contracts for only one benchmark index. Below are the details, including the indices affected, their last trading dates, and key points for traders.

Changes Announced by NSE

From the stated date, the NSE will continue offering weekly index options only for the Nifty 50 Index (NIFTY). Weekly index options for other indices will be discontinued.

NSE Affected Indices and Last Trading Dates:

Important Note:

• No new weekly index options will be introduced beyond the last expiry date for the indices listed above.

Changes Announced by BSE

Likewise, the BSE will discontinue weekly index derivatives contracts for certain indices. Contracts will remain active until their expiry dates, but no new weekly contracts will be introduced.

BSE Affected Indices and Expiry Dates:

Increased Contract Value

According to the NSE & BSE circular, an index derivative contract must have a minimum value of ₹15 lakhs at the time of its launch in the market. Additionally, the lot size shall be determined in such a way that the contract value of the derivative on the day of review is between ₹15 lakhs and ₹20 lakhs.

Here is the updated lot size for NSE index derivatives:

1. This regulation will apply to all new index derivatives contracts (weekly, monthly, quarterly, and semi-annual) introduced beginning November 20, 2024.
2. The existing weekly and monthly expiry contracts will continue with the same lot size until their respective expiry dates.
3.  Existing quarterly and semi-annual expiry contracts will be transitioned to the new lot size on December 24, 2024, the end of the day for BANKNIFTY, and December 26, 2024, the end of the day for NIFTY 50.

The updated lot size for BSE index derivatives:

Long-Dated Index Options Contracts (Quarterly and Half-Yearly) for BSE SENSEX

• Expiry Dates Beyond March 2025: Long-dated contracts with expiry dates in March 2025 and later will continue with the current market lot until December 27, 2024.
• Market Lot Change: After the end of the day on December 27, 2024, the market lot for all long-dated BSE SENSEX contracts will transition to the new market lot size.

Monthly Index Derivatives Contracts on BSE

• Existing Monthly Contracts (Unexpired):
  • Contracts like BSE BANKEX (last Monday), BSE SENSEX50 (last Thursday), and BSE SENSEX (last Friday) for November 2024, December 2024, and January 2025 will maintain the current market lot size.
• New Monthly Contracts:
  • Monthly contracts generated after November 20, 2024 (following the November 2024 expiry) will adopt the new market lot size.

Weekly Index Derivatives Contracts for BSE SENSEX

• Current Weekly Contracts:
  • Weekly contracts created until November 20, 2024 (valid for trading up to January 3, 2025) will retain the current market lot size.
• New Weekly Contracts:
  • Weekly contracts generated after November 20, 2024 (starting at the end of the day on November 22, 2024) will follow the new market lot size.
  • Weekly contracts starting from January 10, 2025, will also reflect the updated lot size.

Extreme Loss Margin (ELM): Additional Margins on Expiry Day

As per the NSE circular, effective November 20, 2024, a 2% Extreme Loss Margin (ELM) will be applied to short index options contracts on expiry days to enhance tail risk coverage. This additional margin will apply to both open short index options at the start of the day and any new short positions taken during the day that are set to expire on the same day.

Conclusion

SEBI’s updated F&O regulations enhance market stability by introducing stricter monitoring, revised margin requirements, and increased contract values, ensuring a safer, more transparent trading environment for all market participants. Stay Updated!