Sebi panel for F&O lot size of Rs 20-30 lakh

“Given the higher risk in derivatives and the large amount of implicit leverage, increasing the minimum contract size would result in reverse sachetization of such risk bearing products .. so increase this to Rs 15-20 lakh in the first phase, and then Rs 20-30 lakh in the second phase,” says the paper.

The extant regulations allow index-based contracts to expire every day. The regulator now wants to be limited to only weekly contracts per index per exchange. If finally allowed, there will be two expiries a week.

Currently, the minimum lot size required for the contract is Rs 5-10 lakh. This was set in 2019 but since the market volume has more than doubled to over Rs 500 trillion from a little over Rs 210 trillion in March 2018 and the share of the retail in index futures soared from around 2% to 41% as of March 2024. Stated differently, for every Rs 100 traded by an individual investor in FY 2018, only Rs 2 went in to the index options segment, which has jumped to Rs 41 in FY24.

According to the Sebi data, the overall derivatives turnover has soared from Rs 210 trillion in FY18 to Rs 500 trillion in FY24, while the futures and options (F&O) segment has seen growing retail investor participation, increasing by over 40% from 65 lakh in FY23 to 96 lakh in FY24. Individual participation in index options has also surged, rising from 2% in FY18 to 41% in FY24.