MUMBAI, October 6 — The Securities and Exchange Board of India (SEBI) on Tuesday formally notified a comprehensive six-point regulatory framework governing equity index derivatives, structured to mitigate excessive speculative froth and protect retail investors from compounding financial losses in the Futures and Options (F&O) segment.
Under the notified circular, the statutory minimum contract value for index derivative contracts will be scaled upward from the current threshold of ₹5–₹10 lakh to an initial band of ₹15 lakh, progressively escalating to ₹20 lakh. Furthermore, stock exchanges have been directed to rationalize weekly expiry contracts to a single benchmark index per recognized bourse, dismantling the proliferation of multi-index daily expiries that had fueled high-frequency intra-day speculative churning.
The capital markets watchdog also mandated an additional 2 percent Extreme Loss Margin (ELM) tail-risk charge on short options positions on the day of contract expiry, alongside the strict upfront collection of option premiums from trading participants. The interventions follow exhaustive empirical studies conducted by SEBI's analytical research cell revealing that over 93 percent of individual retail F&O traders incurred net trading losses aggregating over ₹1.8 lakh crore across the prior three fiscal cycles.
The regulatory architecture of SEBI, financial market stabilization instruments, systemic derivatives risk management, and investor protection frameworks are central themes in RBI Grade B, SEBI Grade A, and UPSC Civil Services (GS-III: Indian Economy and Capital Markets). Aspirants should note that SEBI was initially established as an administrative body in 1988 before being vested with statutory enforcement and adjudicatory powers under the SEBI Act of 1992 following the Narasimham Committee recommendations on financial sector reforms.