SEBI Secondary Market Panel to Review F&O Rules on May 7

According to the NDTV Profit Reports, the Secondary Market Advisory Committee (SMAC) of the Securities and Exchange Board of India (SEBI) is scheduled to meet on May 7. One of the items on the agenda is a review of the impact of recent Futures and Options (F&O) regulations.

Review of Existing Curbs

The panel is expected to assess the effect of several curbs that have been implemented since October 2023 to manage F&O trading volumes. These included:

• Limiting weekly options expiry to one per exchange
• Collecting option premiums upfront
• Increased intraday surveillance
• Revisions to contract sizes
• Measures for expiry day risk management

Reports indicate that these steps have shown some effect already, and additional restrictions or changes are not expected to be a focus for now.

Open Interest Calculation Changes

SEBI had earlier proposed changes to how open interest (OI) is calculated in the equity derivatives segment. On February 25, the regulator suggested replacing the notional value-based method with a ‘Future Equivalent’ calculation model. This was aimed at addressing concerns around market manipulation, particularly in pushing stocks into the Market-Wide Position Limit (MWPL) ban period.

The MWPL framework is used to determine trading limits on a stock. Under the proposed change, OI would be assessed using a more consistent method based on actual future contract exposure.

Read more: SEBI Working on Tech Systems to Monitor Pump And Dump, Bulk Deals, Abnormal Trading!

Suitability Criteria Unlikely to be Discussed

One of the earlier points of discussion in SEBI’s regulatory approach had been the possibility of introducing a suitability framework for retail investors participating in the F&O segment. However, sources indicate this is unlikely to be taken up in the May meeting.

During a press interaction on March 31, 2025, SEBI Chairperson Tuhin Kanta Pandey commented that restricting retail investor participation could be too harsh a measure.

Conclusion 

The SMAC meeting will mainly review the impact of previous regulatory actions on the F&O segment. No major new restrictions are expected at this time.

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