SEBI Crackdown on Weekly F&O To Guard Retail Money, But Can Brokers Thrive Without the Weekly Rush?

SEBI Crackdown on Weekly F&O: The Securities and Exchange Board of India (SEBI) is set to tighten regulations around weekly Futures & Options (F&O), and may soon issue a consultation paper. Experts say these measures could protect investors' money, but hit stock brokers' revenues.

Some argue that these measures were long pending for retail investors' interest, many have raised concerns that a potential ban on weekly F&O would erode both liquidity and revenue. While the SEBI is yet to provide clarity on the prospects of weekly F&O expiries, let's understand what they mean for retail investors and stock brokers.

Weekly F&O contracts are short-term agreements that let traders bet on or hedge against price changes in stocks, indices, commodities, or currencies for one week. For example, if Nifty is at 25,000 and a trader expects it to rise in the next seven days, they can take a position. If Nifty goes up, they make a profit; if it falls, they incur a loss.

Why SEBI Wants To Curb Weekly F&O?

Weekly options have become the darling of traders and stock broker firms alike, offering quick tactical exposures and hedging opportunities. For brokers, these contracts have been a major revenue engine, contributing over three-quarters of their income in recent quarters. So, if everything seems perfect, why is SEBI now cracking down on weekly F&O contracts?

"For SEBI, this is about calming the dance floor. There's enough data to show that many small investors have been losing money in these rapid-fire trades. Ending weekly expiries would be like turning down the music to keep the party from getting too wild - forcing participants to take slower, more deliberate steps. It's a move to shift behaviour from fast speculation to steady investing," explains Sandeep Tyagi, investment manager on small case and, CEO & Founder, Estee Advisors.

Will SEBI Completely Ban F&O Weekly Contracts?

While there is market speculation about a possible F&O weekly contracts phase-out, experts like Charmi Shah believe SEBI is more likely to recalibrate than ban weekly expiries altogether.

SEBI's upcoming consultation paper on weekly F&O is likely to include proposals like standardising expiries across exchanges, elongating contract cycles from weekly to fortnightly or monthly, and revisiting lot sizes and margins to curb speculative excesses.

"The recent move to fix Tuesday and Thursday as expiry days is an early sign of this direction-reducing clutter while maintaining depth. Importantly, regulators have downplayed the likelihood of an outright ban, signalling instead a gradual tightening through structured changes. The objective is to balance investor protection with market vibrancy," stated Shah.

How SEBI Crackdown On F&O Will Impact Investors?

Curbing weekly F&O contracts would protect retail traders, according to Jyoti Prakash, Managing Partner, Equity and PMS at AlphaaMoney, who disagrees that investors use weekly options for hedging.

"In any case, holding small & mid-caps while hedging against weekly Nifty options makes no sense. With 90% of investors losing money, it is a case of "strong preying on the weak," stated Jyoti Prakash, underlining the need for SEBI regulations in the field.

Why Weekly F&O Is Important For Stock Brokers?

Weekly options contracts are the lifeline of stock brokers' revenue. Unlike contracts with longer duration, weekly F&Os allow traders to capitalise from immediate market movements, according to Bhavik Joshi Business Head INVasset PMS.

"On expiry days, premium turnover runs into hundreds of billions of rupees, creating a large fee pool for brokers, exchanges, and clearing houses. For leading retail brokerages, derivatives are the revenue engine, contributing more than three-quarters of broking income in recent quarters. Weekly options also keep investors active, boosting not just commissions but ancillary revenue streams like margin funding, platform fees, and depository services," explained Charmi Shah.

Can Brokers Cope Up With SEBI Crackdown On Weekly F&Os?

Eliminating weekly option expiries would likely reduce short-term trading frequency, impacting market liquidity and broker revenue. "A decline in transactions per underlying instrument could lower brokerage commissions, clearing fees, and margin-related income, which constitute a meaningful portion of derivative brokers' revenue," stated Bhavik Joshi.

Despite its repercussions, SEBI intervention in F&O ultimately aims to harmonise weekly options with the overall derivatives ecosystem. It will also mitigate volatility spikes while maintaining market efficiency. While clarity is needed on SEBI's regulations on weekly F&O, the impact of new norms on brokers will depend on market adaptability.

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