Security and Exchange Board of India
Market regulatory body Securities and Exchange Board of India (SEBI) has presented an important proposal to make futures trading i.e. Future and Options (F&O) trading easier. Often, during sudden huge fluctuations in the market, traders face a lot of difficulty in choosing the right strike price. To overcome this problem, SEBI has introduced a new proposal. Under this proposal, stock exchanges will get the freedom to immediately add or remove new strike prices according to market movements. This will directly benefit the traders, who will continue to get trading options even amidst heavy volatility and will be able to execute their deals at the right price as per the market movements.
The biggest problem for traders in sharp fluctuations
Strike price is the price at which the deal of a share or index is confirmed. Generally, traders choose their strike price by sensing the market trend so that they can protect their investment from high risk. But the real problem starts when one day there is a sudden huge rise or big fall in the market. Suppose Nifty is trading at the level of 25,000. In such a situation, strike prices ranging from 24,900, 25,000 to 25,100 are easily available to the traders.
But if some big news comes due to which Nifty suddenly jumps to 25,700, then new strike prices are not available there. In this situation, traders are not able to find the right option contract as per their strategy. To eliminate this problem from its roots, SEBI has prepared this new draft.
New contracts can be added to the live market
After the implementation of SEBI’s new proposal, if there is any sudden major movement in the market, new strike prices can be added in live trading only. This simply means that investors will have enough options to take trades according to the market direction. All exchanges must ensure that there is a sufficient number of in-the-money (ITM) and out-of-the-money (OTM) strikes around the market price. For this, the exchanges will have to review the market daily. Arrangements will also be made to remove those strike prices which have gone too far from the market price and which are not being used, from the system.
However, SEBI has made it clear that this entire process should be designed in such a way that there is no additional pressure on the technical systems of broking companies. This is because the strike interval has a direct impact on the brokers’ platform. Special care will be taken to ensure that brokers do not have to make any interruption or change in their system due to the addition of new contracts in the live market.
Exchanges will get more discounts
In this new system, the basic structure of the rules will remain the same for the entire market, but the exchanges will have the freedom to take some practical decisions in terms of its implementation. They themselves will be able to decide how much difference should be kept between the two strike prices. Along with this, to maintain transparency in the market, all exchanges will have to publish complete information about their strike price management rules on their website. These rules will also have to be reviewed from time to time by talking to market participants so that they can be improved if necessary.
Let us tell you, SEBI has sought opinions from investors, brokers and all market participants on this important proposal. Common investors can also send their suggestions on this draft till 15 June 2026.
