The Securities and Exchange Board of India (SEBI) has released a consultation paper proposing a new framework for the introduction and management of strike prices for options contracts across equity, currency, and commodity segments.
The regulator said the objective of the proposal is to improve predictability and availability of options strike prices during periods of heightened intraday volatility, while also making trading smoother for market participants.
What SEBI has proposed
Under the proposed framework, stock exchanges will be required to create a comprehensive mechanism governing how new options strike prices are introduced and managed.
The proposals include:
Ensuring a minimum number of In-The-Money (ITM) and Out-of-The-Money (OTM) options contracts are always available
Daily review of strike prices around the prevailing market price
Removal of strike prices that move too far away from prevailing market levels
Allowing exchanges to introduce new strike prices intraday during market hours in the direction of price movement
Giving exchanges operational flexibility based on liquidity and participation levels in different market segments
SEBI also clarified that the intraday addition of strike prices should not require brokers or market participants to make system changes during live market operations.
The regulator has invited public comments on the proposal until June 15, 2026.
Why SEBI wants this change
SEBI noted that during periods of sharp market movement, traders sometimes face inconvenience because suitable options strike prices may not be available near the prevailing market price.
Currently, exchanges follow their own frameworks for adding or managing strike intervals, except for rules relating to long-dated index options.
According to the consultation paper, large intraday swings can cause the market to move beyond the farthest available strike price, limiting trading opportunities and disrupting hedging strategies.
What this means for traders and investors
If implemented, the framework could significantly improve the trading experience in the derivatives market, especially for active options traders.
Easier availability of strike prices
Traders would have access to more relevant strike prices even during sharp market moves, helping them execute strategies more efficiently.
Better liquidity around market prices
By regularly reviewing and introducing strike prices near prevailing market levels, exchanges can improve liquidity concentration and price discovery.
Reduced trading disruption during volatility
In fast-moving markets, traders often struggle when suitable contracts are unavailable. The proposal aims to reduce such disruptions.
Improved hedging flexibility
Institutional investors and retail traders using options for hedging may benefit from more precise contracts during volatile sessions.
No additional operational burden
SEBI has proposed that exchanges manage these changes without requiring brokers to alter systems during market hours, reducing operational risks.
The consultation paper forms part of SEBI’s broader effort to improve ease of doing business and operational efficiency in India’s derivatives market.
Disclaimer:
This article is for informational purposes only and should not be construed as investment advice.