Discount Brokers To Be Hit The Most As SEBI Curbs Derivatives Trading Exuberance: Analysts

Retail-focused discount brokers in India will face the most heat from the market regulator's latest curbs on the country's surging derivatives volume, according to analysts.

Jefferies expects a divergent impact on market players, with discount brokers being most impacted, followed by exchanges like BSE Ltd. Traditional brokers should see relatively lower impact as the lower margin hikes aid their high-net-worth individual client base, the brokerage said in a note.

Clearing members like Nuvama Asset Services that cater to institutional players will have a marginal impact, Jefferies said. Other market participants, such as AMCs, wealth managers, and depositories, remain unaffected, it stated.

Citi Research anticipates that the latest curbs will impact transactional-based capital market players such as brokers, exchanges, and depositories.

India's securities market regulator introduced a range of new measures under its derivatives framework to strengthen the equity index derivatives market.

The new regulations range from limiting one benchmark index per exchange for weekly expiry derivatives contracts to mandatory upfront collection of option premiums from buyers.

The ripple-down impacts, including new investor additions and activity from non-individuals, remain uncertain, Citi said. According to Citi, expect a gradual shrinkage in retail volumes and a 35% impact on index option premium turnover on the NSE. Activity from small-ticket retail investors is likely to moderate, it said.

Phased implementation over the next three to six months should drive calibrated tightening of the market, Jefferies said.