The Securities and Exchange Board of India (SEBI) has unveiled a proposal aimed at standardizing the management of strike prices for options contracts. Announced on May 25, this initiative seeks to enhance trading efficiency, particularly during periods of sharp market volatility. The proposed framework is designed to ensure that options contracts remain accessible close to prevailing market levels, thus facilitating smoother trading experiences for market participants.
In the consultation paper released by SEBI, it was highlighted that inadequate availability of strike prices near current market levels can hinder trading operations when market prices fluctuate significantly. To address this issue, SEBI suggests that stock exchanges maintain a minimum number of in-the-money and out-of-the-money strikes surrounding the market price. Additionally, the regulator proposes that exchanges conduct daily reviews and introduce new strike prices intraday, aligning them with market movements.
- Minimum strike price availability — Stock exchanges will be required to maintain a set number of strike prices near market levels.
- Intraday strike price adjustments — New strike prices can be introduced during trading hours without requiring system changes.
- Public feedback period — SEBI has invited comments on the proposal until June 15, allowing stakeholders to weigh in.
These adjustments are intended to streamline the trading process and eliminate the need for brokers and market participants to modify their systems during live market operations. SEBI has emphasized that the operationalization of this new framework will ultimately rest with individual stock exchanges, which will have the discretion to determine the specifics, such as strike intervals and the minimum number of options contracts to be issued.
Moreover, SEBI aims to enhance transparency by requiring stock exchanges to publish the comprehensive framework on their websites and conduct periodic reviews in collaboration with market participants. The proposed rules will apply uniformly across various derivatives segments, including equity, currency, and commodity derivatives. By facilitating easier access to options contracts, SEBI hopes to improve overall market efficiency and foster a more dynamic trading environment.
