The Securities and Exchange Board of India (Sebi) is reviewing margin requirements for hedged derivative trades as part of a broader effort to improve market efficiency. The proposal aims to address risks associated with speculative trading by retail investors, following a July 2025 study that found about 91% of individual traders in equity derivatives markets incurred losses during fiscal 2025, according to livemint.com.
The margin revamp is under consideration by two Sebi regulatory panels, which are examining margin systems across both cash equities and derivatives markets. The move seeks to better align margin requirements with the actual risk profile of hedged trades, potentially reducing excessive capital charges that can hinder market participation. This initiative reflects Sebi's ongoing efforts to enhance market stability and investor protection, as reported by livemint.com.
This review is significant given the growing participation of retail investors in India's derivatives markets and the high incidence of losses among them. By refining margin rules for hedged positions, Sebi aims to promote more efficient capital use and reduce systemic risks. The move follows similar regulatory recalibrations in global markets aimed at balancing risk management with market liquidity, according to livemint.com.
Sebi's margin system review is ongoing, with further consultations expected before any formal changes are implemented. The regulator's July 2025 study on retail trading losses remains a key reference point in shaping these reforms, as noted by livemint.com.