Sebi Tightens F&O Norms, Stock Broking Firms Fall

New Delhi, Oct 3 (PTI) Shares of a large number of stock broking firms declined on Thursday amid markets regulator Sebi tightening F&O framework to curb speculative trading.

SMC Global Securities tumbled 4.29 per cent, Aditya Birla Money dropped 3.50 per cent, 5paisa Capital went lower by 2.91 per cent, ICICI Securities dipped 2.38 per cent and IIFL Securities declined 2.16 per cent on the BSE.

"New Sebi regulations for the F&O segment have raised concerns about reduced trading volumes in the broader market," said Vinod Nair, Head of Research, Geojit Financial Services.

To curb speculative trading, Sebi on Tuesday put in place a stricter framework for equity index derivatives by increasing the minimum contract size and mandating upfront collection of option premiums.

Other measures announced by Sebi included intra-day monitoring of position limits, removal of calendar spread benefit on expiry day, rationalisation of weekly index derivatives and increased tail risk coverage.

These measures, aimed at protecting investors and maintaining market stability, particularly in the high-risk environment of index options trading on expiry days, will become effective in a phased manner starting November 20, Sebi said in a circular.

The framework came days after Sebi brought a study on Futures & Option (F&O) segment.

In the equity market, the BSE Sensex tumbled 1,769.19 points or 2.10 per cent to settle at 82,497.10. The NSE Nifty slumped 546.80 points or 2.12 per cent to 25,250.10.

A recent Sebi study found that 93 per cent of over 1 crore individual traders in the F&O segment lost an average of around Rs 2 lakh each (including transaction costs) between FY22 and FY24. The total losses of these traders exceeded Rs 1.8 lakh crore during this period.

In the circular issued on Tuesday, Sebi increased the minimum contract size for index derivatives to Rs 15-20 lakh from Rs 5-10 lakh, which was last set in 2015. This was aimed at better aligning with market growth.

"It has been decided that a derivative contract shall have a value not less than Rs 15 lakh at the time of its introduction in the market.

Further, the lot size shall be fixed in such a manner that the contract value of the derivative on the day of review is between Rs 15-20 lakh, Sebi said.

On rationalisation of weekly index derivatives, Sebi said exchanges can offer weekly expiry derivatives only for one benchmark index to curb speculative trading.