MUMBAI: Sebi has made it tougher for individuals to participate in equity derivatives trading by raising the entry barrier in terms of contract size, and requiring upfront fees and costlier roll-overs.
Under the new regulations, option buyers must pay premiums upfront, replacing the practice where brokers were allowed to provide collateral. Sebi has also done away with the special pricing on expiring contracts that enabled traders to take larger positions.Both practices, which allowed investors to sell an expiring option and buy a longer-term one with lower margins, will take effect from Feb 1, 2025.
Noting that the current stipulation that index derivatives must have a contract value between Rs 5-10 lakh was set in 2015, Sebi said that derivatives contracts henceforth shall have a value between Rs 15 lakh to Rs 20 lakh. The lot size will also be adjusted so that the contract value stays within the new bracket during reviews.

Sebi will monitor position limits throughout the day instead of only at the end to control the high trading activity, especially on expiry days. Exchanges will limit weekly expiries to one index per week, simplifying the current practice of multiple expiries.
Speaking to TOI, Dhirendra Kumar, CEO of Value Research, said, “Unlike equity, which by definition has to generate a better return than fixed income over time, derivatives are a zero-sum game, and it is almost always the individual investor who loses. Sebi should introduce a statutory warning illustrating the risk of losses, just like with cigarettes.” He added that while in equity, the risks are of price volatility and the failure of individual companies – which can be addressed by long-term investing and diversification – derivatives are an unnecessary risk for individuals. “Brokerages pretend to make money by selling stocks, but their business model is such that revenue comes from F&O, and they would have to shut shop if investors only bought and held shares,” he noted.
Recently, a Sebi study found that 93% of over 1 crore individual F&O traders incurred average losses of around Rs 2 lakh each between FY22-24, totalling over Rs 1.8 lakh crore. The share has gone up from 89% in FY22.