The Securities and Exchange Board of India has proposed new regulations aimed at curbing the trading surge in index options, a move that will affect high-frequency traders, quantitative funds and brokerage firms, according to a report by Reuters.
SEBI has suggested increasing the minimum trading amount for index options by over three times, cutting the number of contracts expiring each week and raising margins. The regulator also proposed narrowing the range of prices, or strikes, at which options can be traded.
Rishi Kohli, Chief Investment Officer for hedge fund strategies at InCred, explained that these changes could reduce the cost-effectiveness of hedging strategies: "With fewer expiries available, the benefit of cheaper hedges will diminish."
The report cites two unnamed hedge fund managers in revealing that a representative body for India’s quantitative funds plans to ask SEBI to reconsider some of its proposals.
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