(Reuters) -Shares of Indian brokerages pared losses after slipping earlier on Thursday, as analysts said the markets regulator’s tightening of rules for derivatives trading was not as harsh as anticipated.
The Securities and Exchange Board of India (SEBI) on Tuesday raised the entry barrier and made it more costly to trade in the equity derivatives. The changes will be effective from Nov. 20.
SEBI had first proposed tightening derivatives trading in July.
Brokerage Aditya Birla Money, which fell as much as 3.3%, was trading down 2.2% as of 10:38 a.m. IST. Discount broker 5Paisa Capital was last up 1.8% after falling as much as 7%.
Discount broker Angel One fell as much as 5.8% but recovered to trade higher by 7%. The broker had said in July it was considering raising charges on its other services to reduce the impact on revenue.
Shares of exchange operator BSE were up 9% after falling nearly 3% earlier.
SEBI’s hike in margins for short options contracts was lower than expected and could help soften the impact from reduced participation, Jefferies said in a note.
The hike in the minimum contract size of two-to-three times was also lower than the expected three-to-four-fold hike, the brokerage said.
Indian authorities have been raising concerns about the unchecked explosion of retail investor trading in derivatives and the possibility that it could create future challenges for the markets, investor sentiment and household finances.
A SEBI study published last month showed that individual Indian traders made net losses totalling 1.81 trillion rupees ($21.56 billion) in futures and options in the three years to March 2024, with only 7.2% making a profit.
($1 = 83.9330 Indian rupees)
(Reporting by Nandan Mandayam in Bengaluru; Editing by Mrigank Dhaniwala)
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