The impact of Indian market regulator SEBI's decision to impose strict rules in the futures and options (F&O) segment can be seen widely on the Indian stock market. This change may impact up to 60% of F&O trades and 30% of orders from leading brokers like Zerodha. This information has been given by billionaire stock broker Nitin Kamath.

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Zerodha will be affected

After the implementation of the new rules, it can have a direct impact on Zerodha's business. The company has not yet made any changes in its brokerage structure, but this decision will be taken after understanding the impact of the rules. The new rules will be effective from 20 November 2024.

SEBI has made these changes

1. Increase in contract size
2. Ban on weekly expiry contracts

Traders will need more capital

At present the size of index F&O contracts is between Rs 5 lakh and Rs 10 lakh, but from November 20, 2024, this size will increase to between Rs 15 lakh and Rs 20 lakh. Zerodha wrote in its blog that this change will increase the lot size of index F&O contracts and the margin requirements will also increase proportionately. This means that traders will now need more capital.

Additionally, this increase will also impact long-term options trading, especially on Nifty options, as the new lot size will not be a simple multiple of the existing lot size. This may create a situation of odd lots, which may increase complexity in trading.

Ban on weekly expiry contracts

Currently, there are weekly expiry for 4 indices on National Stock Exchange (NSE) and 2 indices on Bombay Stock Exchange (BSE). However, under the new rules only one weekly expiry contract will be allowed. Despite this, no changes have been made to the monthly expiry contracts, allowing traders to continue trading in monthly options.

What does the report say?

According to estimates from market research company Jefferies, the new rules could reduce the supply of weekly contracts by 35%. Currently, index options trade at an average premium of around Rs 68,000 crore per day, of which 35% comes from weekly contracts. The implementation of these rules may reduce the supply of premium in the market, which will impact liquidity and trading volume.