Sebi Unveils 6-Step Framework Against F&O Addiction
Tuesday, 1 October 2024, 06:32
Sebi's Action Plan to Mitigate F&O Addiction
In a bid to curb the alarming trend of F&O addiction among Indian traders, Sebi has introduced a comprehensive six-step framework. These new regulations are a response to significant losses incurred by retail traders in the futures and options market.
Key Features of the Framework
- Upfront Collection of Option Premium: Traders will be required to pay the options premium upfront to mitigate undue leverage.
- Removal of Calendar Spread Treatment: The calendar spread benefit will not be available on expiry days, ensuring greater market stability.
- Intraday Position Monitoring: Stock exchanges must monitor trading positions to prevent excessive trading beyond limits.
- Increased Contract Size: Minimum contract sizes will rise significantly to enhance the suitability of participants.
- Limiting Weekly Expiries: Each exchange will offer only one weekly index expiry, reducing speculative activities.
- Enhanced Tail Risk Coverage: An additional margin will be required on options to cover potential extreme losses.
Implementation Timeline
The measures will roll out in phases starting from November 20, 2024, with full implementation by April 1, 2025. These efforts reflect Sebi's commitment to protecting retail investors from the pitfalls of high-risk trading strategies.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.