NSE To Discontinue Weekly Index Derivatives Contracts In Compliance With SEBI Guidelines

In a significant move aimed at aligning with new regulations set forth by the Securities and Exchange Board of India (SEBI), the National Stock Exchange (NSE) announced the discontinuation of weekly index derivatives contracts for Bank Nifty, Nifty Midcap Select, and Nifty Financial Services.

The respective cessation dates are 13 November, 18 November, and 19 November 2024.

With this decision, the NSE will streamline its offerings to include only one weekly tradeable index: the Nifty 50.

This shift comes in response to SEBI’s recent directives, which mandate that starting 20 November, exchanges can offer only a single weekly index derivatives contract.

This announcement follows a similar decision made by the Bombay Stock Exchange (BSE) on 3 October, where it revealed the discontinuation of weekly derivatives contracts for Sensex 50 and Bankex, effective from November 14 and November 18, respectively.

The BSE will continue to offer weekly derivatives contracts for the Sensex.

Under the new F&O regulations, exchanges must closely monitor intraday positions at least four times a day.

This oversight aims to enforce penalties for any breaches of intraday limits, reflecting a stricter approach to managing risk in the derivatives market.

Additionally, the new SEBI guidelines will increase the size of derivatives contracts in benchmark indices such as Nifty and Sensex, raising them from the current range of Rs5 lakh – Rs 10 lakh to Rs 15 lakh – Rs 20 lakh.

This adjustment aims to stabilize the market and reduce the risks faced by retail investors.

SEBI Tightens F&O Regulations To Address Retail Trader Losses

SEBI’s decision to tighten F&O regulations stems from concerns over the substantial losses experienced by retail traders in the derivatives segment.

A recent report indicated that over the past three years, approximately 1.10 crore traders in the F&O segment incurred a staggering combined loss of Rs 1.81 lakh crore.

Alarmingly, only 7% of F&O traders have turned a profit during this period.

Despite these challenges in the derivatives market, the overall equity cash market turnover in India has witnessed remarkable growth, doubling from FY 2020 to FY 2024.

Moreover, the turnover of index options has surged 12-fold, reaching Rs 138 lakh crore in FY 2024, up from Rs 11 lakh crore in FY 2020.

The NSE’s latest move marks a pivotal change in India’s trading landscape as it adapts to new regulations aimed at fostering a more sustainable and secure investment environment.

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