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BSE will stop offering weekly derivatives on Sensex 50 and Bankex indices, starting in mid-November 2024, following SEBI's new rules aimed at reducing speculative trading risks.
The Bombay Stock Exchange (BSE) has announced it will discontinue its weekly index derivatives contracts on the Sensex 50 and Bankex indices. This decision comes in response to new regulations introduced by the Securities and Exchange Board of India (SEBI) aimed at reforming the equity index derivatives market. As of November 14, 2024, the weekly derivatives contracts on Sensex 50 will no longer be available, followed by the discontinuation of Bankex derivatives on November 18, 2024.
SEBI’s new regulations restrict exchanges from offering derivatives contracts on only one benchmark index with weekly expiries. In line with this, BSE has chosen to retain the Sensex as its primary tradeable index for weekly derivative contracts. This shift is part of a broader regulatory effort to curb excessive speculation and reduce risks associated with trading on expiry days.
In addition to restricting weekly index derivatives, SEBI has also raised the minimum contract value for equity index derivatives to Rs 15 lakhs, with potential increases to Rs 20 lakhs over time. This increase in contract value is expected to limit the involvement of retail traders in risky derivatives trading. Furthermore, buyers will be required to pay premiums upfront, a move aimed at ensuring better risk management.
Another major aspect of the regulatory changes is the mandate for exchanges to monitor intraday positions at least four times per day. This is intended to improve oversight of speculative trading and prevent significant market disruptions. Penalties will be imposed for any breaches of intraday position limits, in line with existing end-of-day restrictions.
SEBI’s recent study revealed that 90% of individual traders suffered losses in the futures and options (F&O) segment between 2021 and 2024, with total losses exceeding Rs 1.8 lakh crore. The surge in retail participation, particularly among younger traders, has raised concerns about the financial risks associated with derivatives trading. These new measures are aimed at curbing excessive risk-taking and protecting household finances.
As BSE discontinues weekly derivatives on the Sensex 50 and Bankex, the market is expected to adjust to SEBI’s new regulations, which aim to limit speculative trading and enhance financial stability. Traders will closely monitor any impact on the BSE share price, Sensex 50 share price, and Bankex share price as the changes take effect in mid-November.
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