F&O trading may reduce by 40% due to new rules, NSE-BSE's earnings will also be hit hard
According to a report by Jefferies, SEBI's proposed measures to reduce the number of weekly option contracts from 18 to six may have an impact of about 35 percent on the industry's premium. If the business is shifted to the remaining contracts, the overall impact may be reduced by 20-25 percent. NSE's income may fall by 25-30 percent and BSE's income by 15-18 percent.
The proposed rules for futures and options (F&O) trading in securities by capital market regulator SEBI may cause losses to stock markets and brokers. This apprehension has been expressed in a report. SEBI has introduced new rules to protect retail traders from losses.
According to the report, these rules of SEBI will lead to a 30-40 percent decline in the volume of F&O trading. If these measures are implemented, the number of retail investors may decrease.
According to a Jefferies report, SEBI's proposed measures to reduce the number of weekly option contracts from 18 to six may have an impact of about 35% on the industry premium. If the business shifts to the remaining contracts, the overall impact may be reduced by 20-25%. According to the report, NSE's income may decline by 25-30% by FY 2025-26, while the Bombay Stock Exchange (BSE)'s income may decline by 15-18%.
These seven proposals of SEBI include rationalizing weekly option contracts, rationalizing the strike prices of assets, and removing calendar spread benefits on the day of contract expiry. The other four proposals include upfront collection of option premiums from buyers of options, monitoring of deal limits during day trading, increase in lot size, and increase in margin requirements near contract expiry.
All financial regulators including Finance Minister Nirmala Sitharaman are concerned about the increasing participation of retail investors in F&O. This is the reason why new rules are being brought to control F&O.
