Derivatives trading drops 38% on BSE, NSE in December due to Sebi curbs

By Savio Shetty

 

Trading of derivatives on India’s leading stock exchange tumbled by more than one-third in the first full month after the regulator implemented curbs to stem a surge in retail participation. 

Daily notional turnover sank 38% on average in December for futures and options on the National Stock Exchange of India Ltd. from November, compared with an increase in the final month of recent years. On BSE Ltd., it dropped 19% last month. 

The Securities and Exchange Board of India cracked down on the derivatives market after a 40-fold boom that led to billions of dollars in losses for retail investors. The regulator introduced a host of new measures — including fewer weekly options available for trading and bigger minimum contract sizes — just as the NSE Nifty 50 Index posted its largest quarterly loss in more than two years. 

 

“The fall in derivative volumes are a function of the new regulations as well as the decline in overall markets,” said Sandip Sabharwal, founder of research house Asksandipsabharwal.com in Mumbai, adding that options trading may pick up again if the market recovers. 

 

More reforms are coming. From Feb. 1, all brokers will start collecting premiums on options purchases upfront, and traders will have to pay fully for their margins on calendar spreads — a popular strategy that involves buying and selling contracts on the same underlying with different maturities — on expiration days. Starting April 1, exchanges will have to monitor position limits intraday.

  

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