Stockbrokers Brace For Impact As SEBI Tightens Index Derivative Framework: ICRA

ICRA Report

Given the concerns on market stability and losses incurred by individual investors amid material increase in retail participation in index derivatives, on October 01, 2024, the Securities and Exchange Board of India introduced six measures to strengthen the equity index derivative framework for protecting market stability and enhancing investor protection.

The measures include rationalisation of weekly index derivatives, increase in their contract size, upfront collection of option premium from buyers, increase in margins on expiry days, removal of calendar spread benefits on expiry days, and enhancing the monitoring of position limits.

This follows the earlier consultation paper floated by the regulator in July 2024 on seven measures for promoting market stability.

Additionally, in a bid to enhance the protection of investors’ cash collaterals, SEBI mandated qualified stockbrokers to offer facility of trading supported by blocked amount in the secondary market (cash segment) using the UPI block mechanism or the 3-in-1 trading facility, which was optional so far.

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