Capital market regulator SEBI on May 25, 2026, issued a Consultation Paper proposing a comprehensive standardised framework for the introduction and ongoing management of strike prices in options contracts to ensure the availability of contracts during periods of sharp intraday market volatility. According to the latest reports from TeamLease RegTech Legal Research Team, the regulator released this consultation paper on Ease of Doing Business - Framework for strike prices of options contracts, with opportunities for public feedback until June 15, 2026. The move is aimed at improving trading continuity and ease of doing business in derivatives markets, as the regulator seeks to enhance operational efficiency and market infrastructure during volatile periods. As reported by Moneycontrol, this proposal builds on earlier reporting from April 28, 2025, when SEBI was first considering such measures.
As reported by ETLegalWorld, significant volatility in underlying or futures prices can lead to market movements beyond the farthest available strike price, causing inconvenience to market participants due to the non-availability of options contracts around prevailing market levels. The regulator identified this gap in the current framework as a key issue requiring immediate attention, with inadequate availability of strike prices near current market levels posing challenges to trading when prices move sharply, as participants will find it difficult to find suitable contracts to trade. According to Moneycontrol, during significant intraday market swings, traders may face difficulties if price movements extend beyond the farthest available strike prices, highlighting the critical need for improved strike price management. The proposed framework specifically addresses concerns that sharp intraday swings in underlying assets can push prices beyond the farthest available strike price, leaving traders without suitable options contracts to hedge or take positions.
According to the consultation paper, stock exchanges are required to put in place a comprehensive and transparent framework governing the introduction and management of options contracts to address the volatility-related challenges. The proposed framework includes maintaining a minimum number of in-the-money and out-of-the-money strikes around the market price, conducting daily reviews, and introducing new strike prices intraday in the direction of market movements. Importantly, such intraday introduction of strike prices will not require changes in the systems of stock brokers or market participants during live market operations, ensuring operational continuity. As reported by TeamLease RegTech Legal Research Team, the framework requires stock exchanges to maintain adequate In-The-Money and Out-of-The-Money strike prices, conduct daily reviews of available strikes, and remove contracts far from prevailing market prices. Strike intervals have a direct bearing on trading activity and the availability of products for market participants, with frequent additions or revisions requiring corresponding daily updates on brokers' trading platforms and applications, increasing system-related overheads.
The operationalisation of the new framework shall be at the discretion of individual stock exchanges, including whether to keep larger strike intervals for contracts away from prevailing market price, minimum number of options contracts to be issued, and other operational parameters. As reported by ETLegalWorld, stock exchanges shall publish such framework on their website and review the framework periodically in consultation with market participants. The proposed rules will apply across equity, currency and commodity derivatives segments, with rules and formulae differing across sub-segments depending on liquidity and participation levels. According to TeamLease RegTech Legal Research Team, exchanges may decide operational aspects such as strike intervals and number of contracts based on liquidity and market conditions, while publishing and periodically reviewing the framework in consultation with stakeholders. The framework would replace the existing provision under Clause 2.1.7.3 of Chapter 5 of SEBI's Master Circular on Stock Exchanges and Clearing Corporations dated 30 December 2024.
At present, there is only one regulatory framework dealing with rationalisation of strike intervals for long-dated index options, while stock exchanges separately follow their own mechanisms for managing strike intervals for options on underlyings and futures contracts. As reported by Moneycontrol, industry players say the current strike prices account for sufficiently large swings in the market, however, a framework around this is a welcome move. For instance, the NSE's Nifty 50 index options chain for the May 26 expiry carries 144 strike prices, ranging from 20,100 to 27,250, against the Nifty's latest close of 24,032, translating into available strikes roughly 16.4 per cent below and 13.4 per cent above the current index level. However, trading activity remains heavily concentrated around at-the-money and near out-of-the-money contracts, with the highest put open interest clustered around the 24,000 strike, followed by the 23,500 and 23,000 strikes, while on the call side activity is concentrated around the 24,500 and 25,000 strikes and nearby levels, reflecting the preference among retail traders and short-term participants for relatively inexpensive OTM contracts.
