Sebi's Working Committee Recommends Raising Derivative Lot Size to Curb High Trading Volumes

Sebi appointed an expert working committee to tackle the problem of excessive speculation, which has been fueled by high levels of retail participation in recent years
F&O
F&O

The Working Committee on Futures and Options has suggested raising the minimum lot size for derivative contracts to Rs 20 lakh- Rs 30 lakh, up from the current Rs 5 lakh. This comes as there has been a rapid surge in derivates volume.

As per a report by moneycontrol, they also recommend for allowing only one weekly options expiry per stock exchange each week and limiting the number of strike prices for options contracts. These measures are directed at controlling the rapid increase in derivatives volume.

Last month, the market watchdog appointed an expert working committee to tackle the problem of excessive speculation, which has been fueled by high levels of retail participation in recent years.

The working group's proposals include two key suggestions that could impact trading volumes significantly. First, the sharp increase in contract size would make trading unaffordable for small-ticket traders. Second, restricting the number of weekly expiries would reduce trading opportunities for traders.

Other recommendations include reducing the number of strike prices, collecting option premiums upfront from buyers, monitoring position limits intra-day, and raising margin requirements as expiry approaches, according to the source.

Other recommendations on the table included reducing the number of strike prices, collecting option premiums upfront from buyers and raising margin requirements as expiry approaches.

The surge in derivatives trading volume in the country has already raised alarms. Despite SEBI's Chairperson assurance that this rise does not pose a systemic risk, the number of people on the losing side is concerning.

The market regulator has been raising continuous red signals in the F&O segment as nearly 90 per cent of retail traders lose money on options bets.

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