SEBI F&O Rules Impact: NSE To Discontinue Three Weekly Option Contracts

The weekly index derivatives contracts on Bank Nifty, Nifty Midcap Select, and Nifty Financial Services will be discontinued effective from Nov. 13, Nov. 18 and Nov. 19, respectively. This follows the new framework launched by the Securities and Exchange Board of India earlier this month.

The NSE will have only one tradeable index, which is the Nifty 50.

SEBI, in the circular issued earlier this month, outlined new regulations for the futures and options trading segment. According to the circular, SEBI has asked exchanges to limit weekly option expiries to one per exchange from Nov. 20.

BSE on Oct. 3 announced that the weekly index derivatives contracts on Sensex 50, Bankex will be discontinued from Nov. 14 and Nov. 18, respectively. This made Sensex the only tradeable index.

According to the new circular, exchanges are now required to monitor intraday positions at least four times a day and will impose penalties for any breaches of intraday limits, similar to those applied at the end of the trading day.

Additionally, the minimum contract value for index derivatives will be increased to Rs 15 lakhs, aimed at enhancing trading standards and efficiency.

These changes come in response to a rise in retail investors trading options, which regulators and the government view as a potential risk to household finances.

A recent study by SEBI revealed that nine out of ten individual traders incurred losses in futures and options trading over the three years ending March 2024, with total losses exceeding Rs 1.8 lakh crore.

The study found that individual traders faced average losses of approximately Rs 2 lakh each, including transaction costs. The top 3.5% of loss-makers, about 4,00,000 traders, reported average losses of Rs 28 lakh each.

Furthermore, the percentage of traders under 30 in the F&O segment increased from 31% in the financial year ending March 2023 to 43% in the following year.