MUMBAI: Following a slew of tightening by the regulator SEBI, the average daily turnover (ADTV) in the derivatives segment has plunged to Rs 280 trillion in December-- the lowest since June 2023 (when it was Rs 460 trillion) from Rs 442 trillion in November.
The key SEBI measures include limiting weekly expiry per exchange to just one and higher extreme loss margins and a fivefold increase in ticket size. And brokers don’t rule out further dip in volumes with the higher contract sizes for weekly derivatives coming into effect from January 1.
The derivatives trading volume or the notional turnover for the options segment, has seen a steep 37 per cent on-month decline in December, the first month since the regulations came into play from November 20. After the market regulator Securities Exchange Board (SEBI) introduced a slew of measures to curb the frenzy in the derivatives segment, where it has found that each retail investor on average lost a whopping Rs 1.25 lakh in the past year, according to the data from exchanges.
For Nifty 50 weekly contracts, the first weekly expiry with the revised contract lot size will be on January 2 and three more curbs such as the upfront collection of the premium and removal of calendar spread benefits on expiry day will be effective from February 1, 2025, and monitoring of intraday positions will begin from April 1, 2025.
According to an internal SEBI assessment, after the recent changes, notional volumes for the derivatives have plunged 35-40 percent, while premium volumes declined 8 per cent but the contract value has gone up as much as 50 per cent.
Following the SEBI norms, exchanges have discontinued weekly contracts of Nifty Bank and BSE’s Bankex, while the extreme loss margins of 2 per cent is now applicable to short positions on the expiry day to cover potential risks due to increased volatility.
Derivatives turnover is now half that of September when a record Rs 537 trillion ADTV was registered amid the benchmark Sensex and the Nifty hitting record highs, which since lost more than 10 percent each now.
Such a sharp fall in the market has also impacted trading volumes, an analyst said.
SEBI's measures on the F&O front followed its earlier study which has out that over 90 percent of individual traders have incurred heavy losses to the tune of Rs 1.25 lakh each in the derivatives frenzy. Some of them had continued trading even after incurring losses for consecutive years.