SEBI Seeks to Enhance Options Trading Framework Amid Market Volatility

SEBI Proposes Changes to Options Contract Framework

India's markets regulator, the Securities and Exchange Board of India (SEBI), has proposed changes to the framework for pre-agreed prices at which options contracts trade. The proposal, outlined in a paper published on the regulator's website on Monday, aims to make strike price availability more predictable for equity, currency, and commodities derivatives trading during sharp market movements.

Under the proposed changes, exchanges will be required to draft rules ensuring that traders have access to options contract choices at prices both lower and higher than the current market price. Indian exchanges will need to review daily the availability of pre-arranged prices, also known as strike prices, and remove ones that are far away from current levels. This will enable exchanges to introduce new strike prices in real-time, allowing traders to continue trading even during sharp price movements.

The current framework has been criticized for not providing traders with suitable options to trade when prices exceed available strike prices during sharp market moves. To address this issue, SEBI has proposed changes to the existing rules, which currently differ between India's two leading exchanges, the National Stock Exchange of India and the BSE.

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Key Details of the Proposal:

SEBI has invited market feedback on the proposals by 15 June.