Exchanges May Plan to Introduce New Options Strike Prices During Trading Hours with SEBI's Proposal

As per The Moneycontrol report, A proposal being evaluated by SEBI may allow exchanges to introduce new options strike prices during trading hours.  

This aims to enhance efficiency in trade execution and price discovery in volatile markets. 

SEBI's Intra-Day Strike Prices Proposal 

The Securities and Exchange Board of India (SEBI) is discussing a plan to permit exchanges to add new options strike prices within trading hours.  

This proposal is in response to the fragmented nature of the current system, which fails to adapt promptly to sharp market movements.  

Providing traders with strike prices closer to the prevailing market levels helps in efficient execution of trades and hedging strategies, especially during unpredictable market conditions. 

The framework aims to ensure that exchanges can add strike prices as needed, without requiring mid-trading modifications by brokers or market systems.  

This supports smoother market functioning and limits disruptions. The exchanges would also periodically review their strike price frameworks with stakeholders to enhance transparency in their operations. 

Read More: SEBI Plans Dynamic Price Band for All F&O Stocks as Entry-Exit Day Distortions to be Eliminated! 

Impact on Market Dynamics 

This initiative is expected to bridge the gap between current market levels and available strike prices during high volatility, ensuring that options trading remains efficient and effective.  

The importance of this move is underscored by the substantial increase in derivatives trading, especially in options markets, and rising retail participation. 

Framework for Improved Strike Price Management 

SEBI's proposal also recommends regular assessment and updates to strike price frameworks, taking into account feedback from market participants to better align with market realities. 

Currently, inconsistencies exist in how strike prices are introduced across different asset classes and exchanges, creating limitations in trading opportunities. The proposal suggests standardisation across stock, currency, and commodity options. 

Conclusion 

Exchanges may soon adjust options strike prices intra-day under SEBI's proposal, aiming for greater efficiency and transparency in volatile markets. This uniform framework could standardise practices across different asset classes and exchanges, offering traders more relevant strike prices even in volatile conditions, thus supporting better risk management and trading operations. 

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