The Securities and Exchange Board of India (SEBI) is evaluating a proposal to raise margin requirements for single-stock derivatives by 30-60 percent on expiry days. This move aims to align the rules governing stock derivatives with those for index contracts, according to sources familiar with the discussions.
Currently, margin offsets for traders involved in calendar spreads typically reduce effective margins by one-third to over half for many stock-futures spreads. Eliminating this benefit on expiry day would necessitate that traders provide significantly more capital during market hours rather than utilizing the reduced margin until the market closes at 3:30 PM.
A SEBI source indicated that the goal is to “align the calendar spread treatment for single stock derivatives with that of index derivatives and the cross-margin framework for index derivatives.” Although the regulator removed the expiry-day benefit for index derivatives starting February 1, this adjustment was not applied to stock futures and options. SEBI is anticipated to release a draft circular for public commentary soon.
Market participants express concerns that this could restrict liquidity on expiry days. Traders managing leveraged spread positions might need to liquidate their positions earlier in the session if they are unable to provide additional margin, potentially resulting in thinner order books, wider spreads, and abrupt position closures as the market closes.
Under the existing framework, traders can maintain both components of a spread throughout the session with lower margins, even though one leg will expire at the end of the day. When that leg expires, the margin requirement for the remaining position significantly increases, occurring after the market has closed.
This situation creates risk for brokers, as they lack the ability to square off the client’s position during market closures due to any margin shortfall. The resulting open position remains undercapitalized, exposing brokers to risks from overnight price fluctuations.
By eliminating the spread benefit on expiry day, clearing corporations would need to collect higher margins during the trading day, thus reducing overnight exposure for brokers but increasing the necessity for real-time margin calls. Concerns have been raised about potentially decreased participation from smaller or cash-constrained traders, who often depend on spread offsets to manage capital requirements effectively.
SEBI has not provided a response to requests for comments.
Published on November 30, 2025.
