There is ongoing buzz in stock market, people are talking about what will be the SEBI F&O Crackdown for F&O trading? SEBI limiting the weekly expires, Contract sizes will be bigger, Margin rules are also going to hard. This will affect the regular traders. What about brokers? And the whole market? Is this affecting good or worse for India’s finances? Let’s see what the experts has too say.
The Why Behind SEBI’s Move
SEBI has to take step for changing derivatives in the trading because a study showed most people lost money trading from FY22 to FY24, 93% total of Rs 1.81 lakh crore in three years individual traders lost money i.e. 60,000 crore per year this confirmed by SEBI’s Chairperson.
The reason of losing all this money by the traders are high speculations, easy browsing, risky contracts mostly “zero-days-to-expiry” are like gambling. SEBI is fighting to protect regular investors from big losses and stop craziness with their new rules (SEBI F&O Crackdown).
What’s New SEBI’s rules?
- NSE and BSE exchanges will hold the longer contracts than one contract each week this implement cuts the chaotic expiry days from 18 to 6 each month.
- Contract sizes will larger that holds minimum value now from Rs 15-20 lakh than 5-10 lakh. Nifty option lots grew from 25 to 60 about.
- Margins getting higher, 2% Extreme Loss Margin (ELM) applies to short options on expiry days. Brokers must collect premiums upfront.
- Calendar spread margin benefits are shut down on expiry days, position limits are now checked throughout the day. This is not just at the close.
Retail Trading Takes a Hit
Small traders are hit by these new rules (Kothari) being unnamed say volumes fell 30-40% in The Economic Times, the reason behind this, Nifty contract will also cost Rs 1,625 up from Rs 625 and Margins for Iron Condor tripled went from Rs 50,000 to Rs 1.5 lakh.
SEBI thinks this way they can save many folks from losing the money but Traders complain about costs and fading the dream of quick gains. X posts from traders shows they joke about switching to crypto or fantasy league.
What the Experts Are Saying
Zerodha’s Nithin Kamath (The co-founder of India’s largest discount brokerage) told The Economic Times that revenue could drop 30-50% after SEBI F&O Crackdown. Also indicates that index derivatives make up a large part of their business. Indeed, He understands SEBI’s goal to repress speculative trading.
SEBI’s Madhabi Puri Buch is regulator’s chief has spoken openly about market risks. She told Business Standard that households losing Rs 60,000 crore each year. She aims to protect small investors and stabilize the market.
Deepak Shenoy of Capitalmind wrote in Mint that bigger lot sizes and fewer expiries help. These moves should reduce the chaos of “zero-days-to-expiry” contracts. Still, he warned about margin volatility may wrong that could get traders a surprise.
VK Vijayakumar from Geojit Financial Services told Outlook Business that the contract size hike was smart move. It helps to restrain hyperactive small traders. This change aligning rules with market growth.
Sudeep Shah of SBI Securities sees a positive side of these new rules. He told The Economic Times that traders might be shifting to equity and long-term investing. Shah thinks investors might finally focus on long-term wealth building. They see the bigger picture in the end.
Read also: MGXs $2 Billion Bet on Binance
Impact of SEBI’s F&O Crackdown on Brokers: A New Reality Unfolds
F&O trading helps Brokers to gain big money they mostly made up in recent. Index options trading went up a lot between 2018 and 2024. It jumped from Rs 4.6 lakh crore to Rs 138 lakh crore, became broker’s key. Fees and margin funding have made good money in trading. According to SEBI data retail traders lost Rs 1.81 lakh crore in F&O from FY22 to FY24. Brokers helped this by offering cheap platforms and leverage.
But things are changing now after SEBI F&O Crackdown. IIFL Securities analysts estimates F&O volumes may drop 30-40% after November 20, 2024. This means less money for brokers. They more rely on brokers business model than their reliance on derivatives. This is directly revenue declined.
