SEBI to Analyse F&O Data Until June Before Post-Phase 2 Action

According to a news report, in light of recent regulatory changes in the equity derivatives (F&O) segment, the Securities and Exchange Board of India (SEBI) has chosen a cautious path forward. 

Following the implementation of the second phase of reforms, the regulator is closely monitoring market trends and trading behaviour before making any further decisions. SEBI will continue to evaluate data until June 2025, aiming to ensure that future measures are grounded in a comprehensive understanding of market dynamics and investor impact.

Regulatory Review Underway

The Securities and Exchange Board of India (SEBI) is expected to hold off on implementing any further changes to the equity derivatives (F&O) segment until at least June 2025. After the introduction of regulatory curbs in the market, SEBI has analysed trading data from December 2024 to March 2025. However, the regulator is cautious, noting that the period under review was influenced by several factors, beyond just the newly imposed restrictions.

Initial findings show a decline in index options trading volumes, with premium turnover falling by 15% and notional turnover decreasing by 34% compared to the same period in the previous year.

Despite these figures, the trend appears more promising when comparing the data with that from two years ago, where premium turnover increased by 11% and notional turnover rose by 47%. This suggests that while there is a decline year-on-year, the overall trajectory remains positive when viewed over a longer period.

Individual Investor Participation and Market Trends

Although the number of individual investors trading in index options has decreased by 5% in premium terms and 16% in notional terms compared to the previous year, there has been a significant increase over the past 2 years. 

Premium turnover for individual investors has surged by 34%, while notional turnover has almost doubled, rising by 99%. Despite this, the overall number of individual traders in the derivatives segment has dropped by 12% from the previous year. However, compared to March 2023, individual trader participation has seen an impressive rise of 77%.

SEBI remains concerned about the substantial share of derivatives, particularly index options, in India’s total market activity. India continues to lead globally in equity derivatives trading volume, which has raised concerns within the regulator’s circles. 

Despite this, SEBI has decided to monitor the situation further, with any decisions regarding tightening regulations or making structural changes likely to be based on a reassessment of the data after June 2025.

Read More: SEBI Plans Major Changes in F&O Rules to Ease Trading and Improve Risk Monitoring.

Conclusion

SEBI is carefully assessing the impact of recent regulatory curbs on the equity derivatives market. While trading volumes show some decline in the short term, longer-term trends indicate a growth trajectory. The regulator's decision on further actions will be determined after reviewing additional data in mid-2025.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.