Business

iie digital desk: The Securities and Exchange Board of India (SEBI) has proposed several changes to index derivatives trading to enhance market stability and investor protection. These proposals aim to align India with global practices and improve the efficiency of derivatives markets.

Key changes include introducing a framework for index derivatives based on sectoral indices, which will provide investors with more diversified options. SEBI plans to tighten eligibility criteria for indices that can be used for derivative products, ensuring that only highly liquid and representative indices qualify. Additionally, SEBI proposes to increase the minimum contract size, which will enhance participation from serious investors and reduce speculative trading.

To protect retail investors, SEBI recommends measures like enhanced disclosures and more robust risk management frameworks for brokers and traders. This includes stricter margin requirements and better surveillance mechanisms to detect and prevent market manipulation.

These changes are part of SEBI's broader efforts to strengthen the Indian financial markets and protect investors. The proposals are open for public feedback, indicating SEBI’s commitment to a collaborative approach in policy-making. If implemented, these reforms could lead to a more transparent, efficient, and resilient derivatives market in India.

Existing Practice: Minimum contract size requirement of Rs 5 – Rs 10 lakh was set in 2015. Proposed: In Phase 1, the minimum value at the time of contract introduction to be between Rs 15 – Rs 20 lakh. Phase 2, after 6 months, implementation of minimum contract size of Rs 20 – Rs 30 lakh proposed.