SEBI Proposes Framework for Strike Prices in Options Contracts

The Securities and Exchange Board of India (SEBI) has proposed a comprehensive framework for the introduction and ongoing management of strike prices in options contracts to ensure continued availability of relevant options during periods of sharp intraday market volatility.

The proposal seeks to strengthen market efficiency and improve availability of option contracts across changing market conditions.

1. Objective of the Proposed Framework

SEBI has proposed the framework to ensure that suitable strike prices remain available during periods of significant intraday price movement.

The proposal aims to:

• Improve market accessibility during volatile conditions
• Ensure continuity in availability of relevant option contracts
• Enhance price discovery and trading efficiency
• Strengthen responsiveness of exchanges to sharp market movements

2. Intraday Introduction of New Strike Prices

A key feature of the proposed framework is the requirement to permit intraday introduction of new strike prices (options contracts) during market hours.

Accordingly, stock exchanges will be required to ensure that additional strike prices may be introduced dynamically where warranted by market movements and volatility.

This is intended to avoid situations where available strike prices become insufficient or misaligned with prevailing market prices during sharp intraday fluctuations.

3. Ongoing Management of Strike Prices

The framework also contemplates an ongoing mechanism for management of strike prices throughout the trading day.

The objective is to ensure availability of a suitable range of option contracts corresponding to changing market conditions and price movements.

4. Applicability Across All Segments

SEBI has proposed that the framework shall apply to options contracts across all market segments, including:

• Equity derivatives
• Currency derivatives
• Commodity derivatives

This seeks to establish a uniform approach for strike price management across exchanges and asset classes.

5. Disclosure Requirement for Stock Exchanges

The proposal further requires stock exchanges to publish the framework on their websites.

The disclosure requirement is intended to ensure transparency and clarity regarding operational procedures governing introduction and management of strike prices.

6. Objective of the Proposal

The proposed framework seeks to improve market resilience and trading efficiency by ensuring timely availability of option contracts during volatile market conditions.

By enabling intraday introduction of strike prices and standardising management practices across segments, SEBI aims to support better liquidity, price discovery and market functioning in the derivatives ecosystem.