Sebi will soon announce F&O restrictions; changes will be introduced by circular

2 minutes of reading Last update: October 1, 2024 | 17:29 IST

The long-awaited change in derivatives trading criteria was not included in the 17-item agenda of the last Sebi board meeting. However, regulatory sources say the restrictions – first proposed in a July discussion paper – could be introduced via a circular “soon”.

The market regulator has proposed seven key measures to curb retail participation in index futures and options (F&O) to curb losses.

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A source familiar with the development said the consultation document presented was in the form of a draft circular, not a draft regulation. As a result, Sebi’s 23-page press release from the post-board meeting was silent on the issue.

“Changes are not excluded. To assume that the proposals did not go through the Sebi board members would be a misinterpretation. Sebi has regulations that allow it to issue changes through a circular. As this was a consultation document that received a lot of interest and response, we hope that the market regulator will consider some suggestions,” said a market participant.

Market participants, including exchanges that will be affected by the proposed changes, have submitted their suggestions on higher barriers to entry, limiting a single benchmark per exchange in the event of weekly expiry, and margin requirements.

The market regulator received an overwhelming response to these proposals, and F&O investors were nervous as the proposed changes took final shape.

In a board meeting held on Monday, the market regulator’s board – which includes members of the Reserve Bank of India (RBI) and the government – gave its nod to several key decisions, including amending the rules governing investment advisers, faster rights issuance, -installment and pari-passu rights of investors in Alternative Investment Funds (AIF).

First publication: October 1, 2024 | 17:08 IST