NEW DELHI: Markets regulator
Sebi
is looking at a two-stage tightening of norms for the equity futures & options segment even as consultations with market participants for the first phase are set to kick off.
While F&O was meant to help investors hedge their risks, in recent years, Sebi as well as govt officials are worried over this segment seeing large scale speculation with retail investors too jumping into the ring and losing money.
An expert committee is closely looking at the data. Its initial recommendations focused on a seven-pronged assault to check speculation has been endorsed by the secondary market advisory committee, comprising experts and key market participants, and the
regulator
is expected to issue a consultation paper in the next few days, a source said.
The expert panel will provide more suggestions in the coming weeks that may be implemented later. Among the recommendations for the initial round is a suggestion to increase the minimum value of each F&O contracts from Rs 5 lakh to around Rs 25 lakh. There are also proposals for weekly expiry of contracts and higher margin requirements for investors.
Although there have been suggestions from market participants for putting in place product suitability norms - as is the case in some countries with criteria like wealth or education of the investor - it may be tough to implement in India.
Sebi's concerns over rising F&O volumes were for the first time flagged in a report in Jan 2023 as it emerged that individual traders who traded with top 10 brokers added up to over 45 lakh in FY22, compared to 7 lakh in FY19. It also said that nine out of 10 individual traders in the equity F&O segment incurred losses, which on an average worked out to Rs 1.1 lakh during FY22. Almost 90% of the active traders incurred average losses of Rs 1.25 lakh during this period.
Since then, the volumes have only increased. In May, the aggregate turnover in the equity derivatives segments of the
BSE
and the
NSE
was Rs 9,504 lakh crore, a rise of 71% over May 2023.
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