India’s market regulator, the Securities and Exchange Board of India (SEBI), is planning new limits on index options trading. The goal is to reduce speculation on expiry days and bring more order to the market.
Recent reports say the regulator is considering raising the intraday monitoring threshold to ₹5,000 crore (net delta exposure). The current limit stands at ₹1,500 crore. The overall gross ceiling would stay at ₹10,000 crore. Any breach of these limits on expiry days would now lead to financial penalties.
Reshaping Expiry-Day Dynamics and Risk Calculations
Analysts estimate expiry-day turnover could fall by 15% to 20%. The biggest hit will likely fall on large proprietary desks and high-frequency traders. These players often dominate expiry-day sessions. At the same time, liquidity may shift toward non-expiry days. The higher ₹5,000 crore cap gives more room for portfolio managers and algorithmic strategies to trade outside expiry windows.
SEBI also wants to apply a delta-based exposure calculation. This method gives more weight to in-the-money contracts and less to far out-of-the-money options. The change should align risk measures more closely with market sensitivity.
“Protective and Stabilizing”
By enforcing penalties, SEBI aims to make the field more balanced and prevent any single trader from moving prices too much. Market experts seem to welcome the shift. They say the new rules will reduce “lottery-style” straddle bets that often fuel expiry-day theatrics. Commenting on the matter, Narinder Wadhwa, managing director and chief executive officer of SKI Capital Services Ltd, said:
“For retail investors, this move could act as a protective measure by reducing the chances of extreme losses, as many individuals often take oversized speculative bets with limited capital. It may also improve overall market stability and ensure a level-playing field by curbing concentration of trades in the hands of aggressive players.”
If adopted, the plan will mark a major change for India’s booming index options market. Expiry days may see less excitement, but regular sessions could draw deeper and steadier participation.
