SEBI's new measures could halve trading volumes in F&O segment

Securities and Exchange Board of India's (SEBI) new measures to curb derivatives trading could halve volumes in the futures and options (F&O) segment, according to a media report.

Media report citing sources said that volumes could drop by as much as 50 per cent after new measures take effect. They expect around 50 to 60 per cent of traders to exit the F&O segment due to higher contract sizes.

Sources further said, "If there is no change in the volume of the derivatives market after the implementation of the new rules, then SEBI can take further action."

"Due to SEBI's action, the average trade size of futures and options may increase to Rs 20,000 in FY 2025, which is currently Rs 5,500," the report stated.

SEBI tightened the F&O segment rules on Tuesday.

Under the F&O measures, the market regulator has increased the minimum contract size in the index derivatives to Rs 15 lakh from the current Rs 5 lakh.

The market regulator has also reduced the weekly index expiry count to one per exchange. This means that exchanges can only offer one expiry in a week on one benchmark index. The market regulator has taken this step due to heavy losses incurred by retail investors in the F&O segment.

Recently a study was released by the market regulator. It was reported that in the last three years, 1.10 crore traders in the F&O segment have suffered a combined loss of Rs 1.81 lakh crore. Out of these, only seven per cent of traders have been successful in making a profit.

The new rules for derivatives contracts will come into effect from 20 November.

To curb speculative trading, the government has also raised the securities transaction tax (STT) on the F&O segment from 1 October.