SEBI’s New Rules for Index Derivatives: Impact on Retail Investors

Dear team, On October 1, 2024, SEBI announced changes to index derivatives with circular no. SEBI/HO/MRD/TPD-1/P/CIR/2024/132, set to take effect starting November 20, 2024. Here’s a summary of the key changes and their implications for retail investors.

1. Increase in Contract Size (Effective from Nov 20, 2024)

New Contract Values: The contract sizes for index F&O contracts will increase from ₹5-10 lakhs to ₹15-20 lakhs. This means higher lot sizes and, consequently, larger margin requirements.

Revised Lot Sizes:

o Nifty 50: From 25 to 75

o Nifty Bank: From 15 to 30

o Nifty Financial Services: From 25 to 65

o Nifty Midcap Select: From 50 to 120

o Nifty Next 50: From 10 to 25

o Sensex: From 10 to 20

o Bankex: From 15 to 30

o Sensex 50: From 25 to 60

This will be effective for all new index derivatives contracts (includes weekly, monthly, quarterly and half-yearly) introduced from November 20, 2024, onwards.

For more details, please refer NSE circular number NSE/FAOP/64625 dated Oct 18, 2024 and BSE notice number 20241021-13 dated Oct 21, 2024.

2. No Calendar Spread Benefits on Expiry Day (Effective from Feb 01, 2025)

Starting February 1, 2025, traders will not receive margin benefits for calendar spreads on expiry day.

3. Limiting Weekly Expiry Contracts (Effective from Nov 20, 2024)

Only the Nifty 50 and Sensex will have weekly expiry contracts from November 20, 2024.

4. Additional Margins on Expiry Day (Effective from Nov 20, 2024)

An Extreme Loss Margin (ELM) of 2% will be applied to short positions (selling options) on expiry day to cover potential risks due to increased volatility.

5. Upfront Collection of Premium for Options (Effective from Feb 01, 2025)

Buyers of options must pay the entire premium upfront.

Nothing changes for you at Swastika, as we have always collected option premium upfront for buying options.

6. Intraday Monitoring of Position Limits (Effective from Apr 01, 2025)

Position limits will be monitored throughout the trading day starting April 1, 2025. Currently, these limits are monitored at the end of each day by the exchanges.