SEBI’s new rules could impact 60% of F&O trades, says Zerodha's Nithin Kamath

Zerodha co-founder Nithin Kamath said that SEBI’s recent move to limit weekly expiries could impact about 60% of overall F&O trades.

Given that many traders prefer weekly contracts for their liquidity and shorter time horizons, some might be hesitant to switch to monthly contracts, which could slow trading volumes. Kamath anticipates that this could result in a 30% reduction in Zerodha’s overall order volume.

Kamath believes the full impact will become clearer by November 20, when these rules come into effect. Zerodha may then reconsider its pricing structures depending on how these changes influence trading behaviour and volumes, he added in a post on X.

The changes, which include the doubling of contract sizes, will also bring increased margin requirements. This might further deter retail traders who manage smaller capital as they will need to adjust to the higher upfront capital needed for maintaining positions.

SEBI’s intention behind these changes—such as the introduction of higher margins on expiry days and upfront premium collection—aims to reduce systemic risks and speculative trading in the derivatives market. However, as Kamath notes, it also reshapes the accessibility and ease with which traders, particularly retail investors, can participate in F&O trading.

These changes come as discount brokers post rising revenues and profits.

Groww Invest Tech Private Limited (GIT), which operates the brokerage app Groww, saw its net operating income more than double to Rs 2,900 crore in FY24, while PAT grew 4X to Rs 297.8 crore according to an ICRA report.

Zerodha's revenue reached the $1 billion mark in FY24 with a profit margin of over 56%, making it among India's most profitable new-age tech companies. Zerodha posted a revenue of Rs 8,320 crore and a profit of Rs 4,700 crore, excluding an unrealised gain of Rs 1,000 crore.