The equity derivatives segment witnessed a significant decline in turnover in December, reaching a 13-month low. This decrease can be attributed to regulatory changes implemented in November to curb excessive trading activity in the segment.
Total turnover in the equity derivatives segment for December was ₹43.99 crore, marking a 22% decline from October. Index options premium turnover also saw a significant drop of 30% to ₹9.6 trillion during the same period. These figures represent the lowest turnover levels since November of the previous year.
The regulatory changes introduced included shifting to one weekly expiry for certain indices, such as the Nifty 50 and Sensex. Additionally, an additional extreme loss margin (ELM) of 2% was applied on expiry day to address tail risks in short option contracts. The contract size for index derivatives was also increased, and other measures such as upfront collection of options premium and intraday monitoring of limits were scheduled for implementation in the coming months.
A study conducted by SEBI revealed that a majority of individual traders in the futures and options (F&O) segment incurred losses over the past few years. In fact, about 60% of traders experienced net losses in futures, while 91.5% faced losses in options trading. The study also found that 93% of individual F&O traders incurred losses totaling ₹1.81 lakh crore over a three-year period.
The decline in turnover in the equity derivatives segment reflects the impact of regulatory changes aimed at promoting a more sustainable and secure trading environment. As traders adapt to the new norms and regulations, it will be interesting to see how the dynamics of the F&O market evolve in the coming months.
