Traders in single-stock futures and options may soon have to set aside higher margins, with the Securities and Exchange Board of India (SEBI) examining a proposal to remove calendar spread benefits on expiry day. According to a Moneycontrol report, the regulator recently discussed the issue with exchanges, clearing corporations, brokers and other market stakeholders.
A calendar spread allows traders to take opposite positions in the same stock across two different expiries, significantly lowering margin requirements due to the hedged nature of the trade. However, concerns have been raised that this benefit continues until the market closes at 3:30 PM on expiry day. Once the near-month contract expires, the position becomes unhedged, sharply increasing margin requirements after market hours.
This puts brokers in a difficult position since they cannot square off positions after closing. If clients fail to provide the enhanced end-of-day margin, the unhedged position carries overnight risk with inadequate capital — a scenario the industry flagged as potentially dangerous.
Following industry representations, SEBI has discussed the proposal with clearing corporations. A note reviewed by Moneycontrol states: “Clearing corporations (CCs) to remove the calendar spread benefit to stock derivatives on expiry day as is being currently done for equity index derivatives.” It further suggests doing away with calendar spread benefits across expiries on the day of expiry.
If implemented, traders will need to maintain margin for both legs of the position on expiry day, increasing capital requirements for single-stock derivative trades. The regulator may release a consultation paper after completing internal deliberations.
SEBI had already discontinued calendar spread benefits for index derivatives on February 1, 2025, as part of measures to curb excess speculation and better manage expiry-related risks. Extending similar rules to stock derivatives would align margining frameworks across the equity derivatives ecosystem.
SEBI has not responded to queries on the development.
