Derivatives segment contributes a significant portion to the overall revenue for brokers given the massive surge in this segment in the recent past.
However, Sebi’s new restrictions mean that it will likely hit the financials of the broking companies like Angel One.
Sebi on late Tuesday said it will start implementing a new framework to regulate the high-risk world of futures and options by taking six measures including increasing the contract size to Rs 15 lakh from Rs 5-10 lakh and limiting weekly expiries to one per exchange.
The new rules come into effect in a graded manner beginning from November 20 and are based on recommendations by an Expert Working Group (EWG) to strengthen the equity index derivatives framework.
A recent Sebi study found that 93% 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.The report also highlighted that the percentage of loss-making traders increased from 89% in FY22.In its circular issued, Sebi has increased the minimum contract size for index derivatives to Rs 15-20 lakh, up from Rs 5-10 lakh, which was last set in 2015. This was aimed at better aligning with market growth.
Further, the lot size will be fixed in such a manner that the contract value of the derivative on the day of review is within Rs 15 lakh to Rs 20 lakh.
On rationalisation of weekly index derivatives, Sebi said exchanges can offer weekly expiry derivatives only for one benchmark index to curb speculative trading.
Further, an additional 2% margin (ELM) will be levied on short options contracts on the day of expiry to address speculative risks.
This adjustment, effective from November 20 ensures that the higher leverage and risks in derivatives align with market growth and maintain suitability for participants.
On Tuesday, Angel One shares closed 1.3% higher at Rs 2,594 on NSE.
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