The Securities and Exchange Board of India (SEBI) has been actively introducing measures aimed at bolstering market stability, transparency, and investor protection. Here's a summary of the key policy changes announced in October 2024.
1. Enhancing Stability in Equity Index Derivatives
SEBI has introduced comprehensive changes in the equity index derivatives market:
- Upfront Premium Collection: From February 1, 2025, option premiums must be collected upfront.
- Intraday Monitoring of Position Limits: Effective April 1, 2025, positions will be monitored at least four times during the day instead of just once at day-end.
- Larger Contract Sizes: Starting November 20, 2024, new derivative contract sizes will increase to INR 15 lakhs, compared to the earlier range of INR 5–INR 10 lakhs.
- Limiting Expiry-Day Speculation: Only one weekly expiring derivative per exchange will be allowed, effective November 20, 2024, with a 2% increase in tail risk coverage for short contracts.
These measures are aimed at curbing speculative trading and enhancing market integrity. In response, the National Stock Exchange (NSE) revised its lot sizes for key indices like Nifty and Nifty Bank and announced that only Nifty 50 weekly derivatives will continue, discontinuing others like Nifty Bank and Nifty Midcap Select.
2. Strengthening Core Settlement Guarantee Fund
A revised stress-testing framework for the equity derivatives market will ensure robust risk management. This framework introduces advanced methodologies like Stressed VaR and Filtered Historic Simulation for determining the Minimum Required Corpus (MRC) of the Core SGF. Clearing Corporations will also categorize credit exposure based on their clearing volumes to manage risks more effectively.
3. Changes in Securities Payout Timings
To improve efficiency, SEBI has shifted the payout time in the T+1 Rolling Settlement from 1:30 PM to 3:30 PM, effective immediately. This ensures securities are credited directly to investors' demat accounts on the same day.
4. New Position Limits in Equity Derivatives
SEBI revised position limits for Trading Members in index futures and options. The new cap is the higher of INR 7,500 crores or 15% of total market Open Interest (OI).
5. Liquidity Window for Debt Securities
A new liquidity window for non-convertible securities allows issuers to offer put options, giving retail investors an exit before maturity. Issuers can provide this facility under strict conditions, including a minimum allocation of 10% of the issue size and a three-day monthly or quarterly redemption window.
6. Mutual Funds and Insider Trading
Mutual fund units are now part of insider trading regulations. From November 1, 2024, Asset Management Companies (AMCs) must disclose holdings of trustees, designated persons, and their relatives on a quarterly basis. Transactions exceeding INR 15 lakhs must be reported to the AMC’s Compliance Officer within two business days.
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