SEBI is set to introduce new rules regarding option trading, especially in stock options. Currently, there are five key conditions that determine which stocks can have option trading and which cannot. These rules were last revised in 2018, but SEBI believes updates are necessary due to significant changes in the market since then, including turnover and market capitalization.
Today, there are concerns about market manipulation and loopholes in the current system. In this video, we'll dive into these five rules to understand what they are today, SEBI's intentions behind them, and how they'll impact traders like you.
Firstly, the average daily turnover condition focuses on the top 500 listed stocks by their average daily traded value. Stocks meeting this criterion are eligible for option trading.
Secondly, the median quarter sigma order size is a measure to prevent manipulation. It ensures that the minimum order size reflects the volatility of the stock. SEBI's proposal suggests this order size should range between 75 lakhs to 1 crore rupees.
The third condition is the market-wide position limit (MWPL), which restricts the open position one can hold in any option contract. SEBI proposes raising this limit from 1250 crore to 1750 crore rupees to safeguard against manipulation.
Next, the average daily delivery value for the past six months is being increased from a minimum of 10 crore rupees to 30-40 crore rupees in the new proposal. This aims to enhance market stability and integrity.
Finally, the product suitability framework dictates that option contracts must have a minimum daily turnover of 150 crore rupees and an open interest of 500 to 1500 crore rupees to deter manipulative practices.
These rules are crucial for maintaining market safety and fairness in stock options trading. Failure to comply with these conditions could lead to suspension of option trading for certain stocks, affecting market participants and investors alike.
Watch this video to understand SEBI's upcoming rule for regulating stock options trading with specific criteria to ensure market stability and reduce risks for investors.
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0:00 - Why need of this new SEBI Rule?
1:09 - Growth of Stock Options Turnover
2:50 - Condition of Average Daily Turnover
3:22 - Conditon of Sigma Order Value
3:07 - Condition of MWPL
5:55 - Condition of Average Daily Delivery Turnover
8:00 - Condition of Product Success Framework
8:51 - How will this Rule Benefit Retail Traders?
