Dateline: MUMBAI, July 8, 2025 – India’s securities regulator denied reports it was considering linking options leverage limits to cash positions, calming market fears after brokerage stocks tumbled.
- SEBI officially denies proposal to link options leverage to cash
- Brokerage stocks recover after 9% decline on regulatory concerns
- Jane Street trading ban sparked broader derivatives oversight speculation
Market reaction & context
The Securities and Exchange Board of India (SEBI) said Tuesday there was no proposal under consideration to link derivatives leverage to cash market positions 1. The clarification came after brokerage stocks including BSE Ltd and Angel One plunged up to 9% on Monday following media reports suggesting such regulatory changes were being discussed 2.
The denial helped stabilize trading-focused stocks that had sold off amid concerns about potential restrictions on India’s booming options market. Market participants had worried that linking leverage to cash holdings could significantly reduce trading volumes and impact brokerage revenues.
Regulatory context
The speculation arose following SEBI’s recent action against Jane Street, the US trading firm that was banned from Indian markets for alleged manipulation 3. Earlier reports suggested SEBI’s board might consider a formula-based approach to connect options exposure with underlying cash positions as part of broader market oversight measures 4.
India’s derivatives market has seen explosive growth, with options trading volumes reaching record levels in recent years. The surge has raised regulatory concerns about excessive speculation and potential systemic risks from highly leveraged positions.
Industry implications
The regulatory uncertainty highlighted the sensitivity of brokerage business models to potential policy changes. Companies like Angel One and discount brokers have built significant revenue streams from high-frequency options trading by retail investors.
SEBI’s tweet dismissing the reports provided immediate relief to market participants who had feared imminent restrictions on derivatives trading 5. The regulator’s clarification suggests current leverage frameworks will remain unchanged for now, though broader market oversight discussions continue.
Market outlook
While SEBI’s denial removed immediate regulatory overhang, the episode underscored ongoing scrutiny of India’s derivatives market structure. The Jane Street case has intensified focus on trading practices and market manipulation, potentially leading to other regulatory measures.
Investors remain watchful for any future policy proposals that could impact the lucrative options trading ecosystem that has driven much of India’s recent market growth.
Not investment advice. For informational purposes only.
References
1 (July 8, 2025). “India’s markets regulator says no proposal to link options leverage limits to cash positions”. Reuters. Retrieved July 8, 2025.
2 (July 7, 2025). “BSE, Angel One stocks tumble up to 9% as SEBI may link options leverage to cash exposure”. Economic Times. Retrieved July 8, 2025.
3 (July 8, 2025). “Jane Street to challenge India ban, says it engaged in basic arbitrage”. Reuters. Retrieved July 8, 2025.
4 (July 8, 2025). “SEBI may consider linking options leverage to cash positions via a formula”. Moneycontrol. Retrieved July 8, 2025.
5 (July 8, 2025). “SEBI Confirms No Proposal To Link Options Exposure With Cash”. NDTV Profit. Retrieved July 8, 2025.