The Securities and Exchange Board of india (Sebi) has received feedback from approximately 6,000 stakeholders regarding its consultation paper on Futures & Options (F&O) trading, as reported by Sebi Chairperson Madhabi puri Buch on Thursday. The consultation paper, released in July, proposed several changes including increasing the minimum contract size, collecting option premiums upfront, intra-day monitoring of position limits, rationalizing strike prices, eliminating calendar spread benefits on expiry day, and raising the margin for contracts nearing expiry. These measures are intended to enhance investor protection and promote stability in the derivatives market.
At the Global Fintech Fest 2024, Buch mentioned that technology has facilitated the efficient processing of this large volume of feedback. She also noted that Sebi is developing numerous AI-powered technologies to enhance market surveillance and processing.
Earlier this month, Sebi Whole-Time Member Ananth Narayan G clarified that the regulator's aim in restricting derivative trades is to reduce the “expiry day frenzy” in options trading, not to ban derivatives altogether. Sebi Chief had previously indicated that problematic trading in futures and options costs households up to Rs 60,000 crore annually, and research showed that retail traders lose money in nine out of ten trades in this segment.
In response to concerns about excessive trading, the government increased the securities transaction tax (STT) on futures and options from october 1, as announced in the Union Budget. This move follows concerns highlighted in the Economic survey regarding the rising speculative trading among retail investors, which the survey criticized as inappropriate for a developing country.
It also pointed out that the sharp increase in retail investor participation in F&O trading is likely driven by humans’ gambling instincts.
click and follow Indiaherald WhatsApp channel