'Sebi's plan on index derivatives to reduce volumes, lower volatility'

Markets regulator Sebi's proposal on tightening rules for index derivatives if implemented may result in erosion of volumes from Futures & Options (F&O), experts said on Wednesday.

At the same time, it will enhance investor protection and promote market stability in derivatives markets, they added.

In its consultation paper on Tuesday, the regulator has proposed seven measures, including increasing minimum contract size and upfront collection of option premiums, intra-day monitoring of position limits, rationalisation of strike prices, removal of calendar spread benefit on expiry day and increase in near contract expiry margin.

One of the proposals is to rationalise weekly expiry and restrict it to one per week on the benchmark index per exchange. This change will likely impact volumes, as the recent volumes in the equity derivatives segment have been driven by weekly expiries, HDFC Securities MD & CEO Dhiraj Relli said.

"Reducing volumes in F&O will bring down the ...