In a consultation paper, entitles, “Enhancing Trading Convenience & Strengthening Risk Monitoring in Equity Derivatives”,  Sebi had sought public feedback in Feb to ensure that blunt regulations should not serve as a substitute for surveillance and enforcement by regulators.

It proposes moves to exercise sharper control over possible concentration and manipulation risk by enhanced surveillance and enforcement rather than setting regulatory limits, the source said, adding that the latter can stifle market making.

  The public feedback on the proposals mentioned in the consultation paper has been largely positive, and some changes have also been made to the proposals in accordance with the comments received. Position limits for index options have been relaxed to Rs 1,500 cr on a net basis and Rs 10,000 cr on a gross basis with no intraday limit to enable market participants to carry out their activities smoothly.

Individuals’ activity on index options in the derivatives segment has not declined as much as expected, and it will re-examine this activity and take further actions if required.

Sebi examined activity in index options between Dec 2024 and Mar 2025 and found that while there has been some drop on a year-on-year basis, the activity is much higher than two years ago.

From Nov 2024, Sebi introduced certain restrictions on the futures and options segment to limit individual activity, as data pointed to over 90% of the trades by individual investors ending up in losses.

An analysis of the data for the four months suggests that the number of individuals trading in equity derivatives is down 12% year-on-year, but up 77% when compared to the two-year-ago period, or between December 2022 and March 2023. The index options volume of individuals is down 5% on premium terms and 16% on notional terms, but up 34% and 99% on premium and notional terms, respectively, when compared to two years ago. “Sebi will re-examine the trading activity of individuals in index options from an investor protection and systemic stability perspective.” It has been noticed that despite the measures taken last year to contain speculative overtrading in index options, particularly on expiry day, the activity is high. (With inputs from PTI)