Sebi weighs margin changes for longer-dated derivatives

India’s market regulator, Sebi, is evaluating stricter margin rules for derivatives contracts with longer expiry dates. The proposal targets contracts beyond 30 days, up from the current 15-day limit, to reduce systemic risk after $1.2B in defaults last year. Regulator aims to curb excessive leverage in futures and options trading. Proposed changes follow $1.2B losses in 2023 from derivatives defaults.

Market participants await final guidelines by end-March 2024. Brokerages like ICICI Securities and HDFC Securities prepare for higher client margins. Before: 15-day expiry threshold for margin rules, now After: 30-day expiry threshold proposed, with higher collateral demands. Traders and investors face higher upfront costs, tightening liquidity for long-dated bets. Brokerages must adjust risk models, while retail traders may face restrictions on leveraged positions.

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