Brokerage stocks end lower after India tightens rules for derivatives trading

FILE PHOTO: People watch results for India's general elections on a screen outside the Bombay Stock Exchange (BSE) in Mumbai·Reuters
Reuters
Updated 2-min read

(Reuters) - Shares of most Indian brokerages settled lower on Thursday after the markets regulator tightened rules for derivatives trading, while an escalating Middle East conflict weighed on broader markets.

The Securities and Exchange Board of India (SEBI) on Tuesday raised the entry barrier and made it more costly to trade in equity derivatives. The changes will be effective from Nov. 20.

SEBI had first proposed tightening derivatives trading in July.

Online trading platforms Aditya Birla Money and SMC Global Securities fell the most, dropping 3.7% and 3.8%, respectively. They were flat earlier in the session.

Discount broker 5Paisa Capital, which rose 3.8% earlier in the day, ended down 2.7%.

The benchmark Nifty 50 and S&P BSE Sensex posted their worst sessions since early August as the widening Middle East conflict dented risk appetite. [.BO]

Discount broker Angel One, was the lone gainer, closing 5.5% higher in a choppy session after analysts at Investec raised the price target on the stock to 3,000 rupees, the second-highest on the Street.

Exchange operator BSE's shares closed up 2.5% after briefly rising nearly 10%. BSE, which has smaller exposure to the derivatives segment, would be affected less by the new rules than the National Stock Exchange of India, Motilal Oswal said in a note.

SEBI's new rules would hurt 60% of all futures and options trades and 30% of overall trades, Nithin Kamath, co-founder of India's largest brokerage Zerodha, said in a post on X, adding that Zerodha would decide on pricing changes on Nov. 20.

Indian authorities have been flagging concerns about the unchecked explosion of retail investor trading in derivatives and the possibility that it could create challenges for the markets, investor sentiment and household finances.

A SEBI study published last month showed that only 7.2% of individual Indian traders made a profit in futures and options in the three years to March 2024.

($1 = 83.9330 Indian rupees)

(This story has been corrected to fix the spelling of Zerodha co-founder's name, in paragraph 9)

(Reporting by Nandan Mandayam in Bengaluru; Editing by Mrigank Dhaniwala and Eileen Soreng)