Jane Street aftermath:
Sebi denies proposal to link options with cash positions
Jul 08, 2025
Synopsis
Sebi has dismissed media reports suggesting a proposal to link options leverage to cash market positions. The regulator clarified no such change is being considered currently and reaffirmed its commitment to due regulatory process and transparency.
Sebi denied reports of linking options leverage to cash positions, clarifying no such proposal is under review, calming investor concerns after sharp stock reactions.
Amid TV reports that Sebi is planning to link options-market leverage directly to corresponding positions in the cash equity segment, the markets regulator on Tuesday denied that any such proposal was in the works.
"Apropos reports in some sections of media around supposed proposals to link option leverage limits to cash positions, it is clarified that no such proposal is currently under consideration," Sebi said in a statement on social media platform X.
"As ever, SEBI will follow due process including transparent and public consultation around any proposed changes to any regulation or circular," it said.
Leading to a sharp fall in shares of BSE, Angel One and other market infrastructure institutions, a TV channel had reported that Sebi is trying to boost liquidity in the cash market while throttling unwarranted options activity under the proposed mechanism.
The move would have meant that the larger a trader’s underlying position in the cash market, the higher their leverage allowance in options would be.
Heightened activity in the derivative markets by small retail traders have been under the regulator's scrutiny. Last year in November, Sebi implemented a range of measures targeted at reducing market volatility, especially from daily index expiries, including limiting weekly expiries to only Nifty and Sensex contracts, increasing the lot size from Rs 5-10 lakh to Rs 15-20 lakh, and increasing margins for expiry day trading.
Last week, Sebi brought out an interim order against American quant trading firm Jane Street and accused it of running “an intentional, well-planned and sinister scheme” of manipulating the derivatives market in India. The firm was found to have made a profit of about Rs 36,500 crore through systematic market manipulation.
Sebi's latest research report shows retail F&O traders' cumulative net losses ballooned from Rs 75,000 crore in FY24 to a staggering Rs 1.05 lakh crore in FY25.
The carnage deepened as more Indians rushed into the derivatives casino. Individual derivative traders surged from 86.3 lakh in FY24 to 96 lakh in FY25, but their misery only multiplied. Average losses per person jumped from Rs 86,728 in FY24 to Rs 1,10,069 in FY25, a devastating 27% increase.
The three-year destruction has been breathtaking. In FY22, only 42.7 lakh F&O traders populated Dalal Street, making cumulative losses of Rs 40,824 crore. Within three years, both trader numbers and losses have more than doubled.
"Further, the percentage of traders making losses in equity derivative segment remained broadly unchanged at 91% from earlier study done by SEBI," the regulator noted, underlining the brutal mathematics of derivatives trading where nine out of ten participants lose money.
[The Economic Times]
