F&O Trading New Rules: Norms to change, SEBI to release circular — here's what traders & investors should know

F&O trading norms change: The norms to trade in the derivatives market are expected to change as the Securities and Exchange Board of India (SEBI) Committee has approved the new criteria and shall soon come out with a circular on it within a month, Zee Business Associate Editor Brajesh Kumar said in his report.  

Kumar quoting sources in an exclusive report said, “As many as 25-30 per cent of reduction is likely in the number stocks from Futures and Options (F&O) market, this means around 160-170 stocks will only be available to trade after new norms against 195 shares at present.” 

Decoding the new changes, the associated editor said: 1) Market Wide Position Limited MWPL may increase to Rs 1000 crore from Rs 500 crore at present for entry of news share; 2) Average daily cash volume shall be raised to Rs 20 crore from Rs 10 crore at present and 3) Median quarter sigma size will also be increased to Rs 50 lakh from Rs 25 lakh at present. 

In the circular, SEBI may ask for any new entrant in the F&O segment to have at least 200 brokers or 15 per cent trading in that stock, with at least 75 per cent of total trading days, Brajesh Kumar further said while explaining the new rules for F&O trading. 

बदलेगा F&O वाले शेयरों का नियम#SEBI कमेटी से पैमाना बदलने के प्रस्ताव को मंजूरी 

अब पैमाना बदलने के लिए सर्कुलर तैयार हो रहा है

कैसे बदलेगा F&O में एंट्री का पैमाना 

जानिए पूरी डिटेल्स ब्रजेश कुमार से @BrajeshKMZee | @SEBI_India | #FnO pic.twitter.com/FVa80mx1MB

— Zee Business (@ZeeBusiness) September 19, 2022

SEBI is also mulling a product success framework for new share entry in the F&O category, sources told Kumar. He added that the F&O criteria change has been in discussions since May and was again taken up in July and it was eventually finalized in September by the committee – the circular for the same is in process. 

Ashu Madan of JM Financial said that the volatility in the F&O segment may rise with MWLP increase and F&O stocks won’t come in the ban category soon. He added that big positions and big trades are likely in the F&O segment because of changes in the MWLP norms. 

On comparing F&O and Cash Market, Madan said, “A trader tries to damage control and avert losses by implying a strategy of option, hedge, double hedge in F&O, however, in cash segment there is no damage control, and the trader just prays for the falling stock to rise.”  

Similarly, market analyst Kunal Saraogi mentioned that stocks with low MWPL are likely to come out of F&O category, which is good news, as many wrong entities are in the segment right now.