Sebi Proposes Tighter Rules for Index Derivatives Amid Rising Speculative Trading

The Securities and Exchange Board of India (Sebi) has proposed tightening rules for index derivatives to limit speculative trading. New measures include revising minimum contract sizes and requiring upfront option premiums. These come after concerns raised by the government and economic survey about retail investors' speculative activities in derivative markets.

The Securities and Exchange Board of India (Sebi) on Tuesday announced proposals to tighten regulations for index derivatives, aimed at curbing speculative trading. This initiative follows the Union Budget's decision to raise the securities transaction tax (STT) on futures and options trades starting from October 1.

The Economic Survey had previously flagged concerns over the rising interest of retail investors in derivative trading, noting that speculative trade has little place in a developing economy.

Sebi's consultation paper proposes significant measures, including the revision of minimum contract sizes, intra-day position limit monitoring, and the requirement of upfront premium collection from clients. These steps are intended to enhance investor protection and market stability.