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New framework to curb excessive speculation in stock market has been announced by SEBI

Published on October 03, 2024
Current Context: The Securities and Exchange Board of India (SEBI) announced a new framework to curb excessive speculation in the stock market on October 1, 2024.
New framework to curb excessive speculation in stock market has been announced by SEBI
  • Here are the key measures introduced:
    • Increased Minimum Investment: The minimum amount required to invest in index futures and options (F&O) contracts will be raised from the current range of ₹5-10 lakh to ₹15 lakh. This change aims to make these contracts less accessible to smaller investors.
    • Upfront Collection of Option Premiums: Starting February 1, 2025, brokers will need to collect option premiums upfront from buyers. This measure is intended to discourage excessive intraday leverage.
    • Removal of Calendar Spread Benefits: The benefit of offsetting positions across different expiries (calendar spread) will no longer be available on the expiry day for contracts expiring on that day, effective February 1, 2025.
    • Intraday Monitoring of Position Limits: From April 1, 2025, stock exchanges will begin intraday monitoring of position limits for equity index derivatives to prevent positions from exceeding permissible limits.
    • Reduction of Weekly Expiries: Starting November 20, 2024, the number of weekly expiries for index derivative contracts will be reduced to one per benchmark index per exchange.
    • Higher Margin Requirements: An additional extreme loss margin (ELM) of 2% will be implemented for all open short options on the day of expiry to protect investors from extreme market fluctuations.
  • These measures are designed to enhance market stability and protect retail investors from the risks associated with speculative trading.

Question:

1 What is the new minimum investment amount required to invest in index futures and options (F&O) contracts as per SEBI's October 1, 2024, announcement?

  • A) ₹5 lakh
  • B) ₹10 lakh
  • C) ₹15 lakh
  • D) ₹20 lakh
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