look news india
The Working Committee on Futures and Options has recommended that the minimum size of derivative contracts be increased to Rs 20 lakh to Rs 30 lakh from the current level of Rs 5 lakh.
It has suggested restricting weekly options to only one expiry per week per stock exchange and capping the strike price for option contracts to prevent unbridled growth in derivative volumes.
For some time now, the role of retail investors in the derivatives market has been increasing. Therefore, the Securities Exchange Board of India (SEBI) formed an expert working committee last month to suggest measures to address this problem and provide protection to retail investors. Two recommendations made by the working committee, if implemented, can prove to be decisive in reducing the share of retail investors in the derivatives sector. One of which is to increase the contract size. If this is done, it will be financially disadvantageous for small traders. And the second step is to limit weekly expiry. Which will limit the field for traders. Other proposals include lower strike prices, advance collection of option premium from option buyers, intra-day monitoring of position limits and further increase in margin requirements near expiry. These suggestions will be considered by the Secondary Market Advisory Committee before taking a final decision on these recommendations. It is worth noting that the increase in derivative volume in India has been a matter of concern for some time.