No extra actions on derivatives on anvil: SEBI WTM Narayan

SEBI’s Wholetime Member Ananth Narayan. File

The capital markets regulator will not be planning any extra measures to curb or prohibit exercise in derivatives, SEBI’s Wholetime Member Ananth Narayan stated on Saturday (January 11, 2025).

“An professional group below former RBI government director G. Padmanabhan continues to work on bettering the system, and a few strikes on ease of doing enterprise and higher danger administration are being mulled,” he added.

“At this cut-off date, there is no such thing as a considered SEBI taking any additional steps on this explicit regard,” Mr. Narayan stated, addressing an occasion organised by SEBI-promoted NISM right here.

He additionally made it clear that the SEBI will not be mulling any steps on “suitability and appropriability”, which can decide who can commerce within the derivatives market.

It may be famous that in November, SEBI imposed a set of restrictions to curb extremely speculative trades within the futures and choices market after information identified that retail buyers misplaced cash in 93% of the trades over the past three years.

Making it clear that SEBI has nothing towards derivatives and that they assist in worth discovery and deepening the market, Mr. Narayan assured that the tweaks will likely be launched solely after consultations.

Among the measures being mentioned inside the market regulator embrace steps to raised measure danger within the derivatives market.

“What you want ideally is that the volumes within the money market needs to be good and liquid, and there needs to be depth out there. And likewise, the volumes within the spinoff market must also have depth, must also have good volumes,” he famous.

“It is very important ensure that there’s some sort of connectivity within the liquidity of the 2 markets,” he stated.

“What could be very clear to us is the present manner of measuring open curiosity as notional of futures and notional of choices is just not proper. It offers a really, very unsuitable image, and there’s a have to debate how we transfer ahead right into a extra significant metric,” he stated.

Mr. Narayan stated the SEBI can be contemplating linking market-wide place limits to supply volumes.

“Linked to the identical, it’s contemplating a revision of index coaching limits imposed in the course of the COVID pandemic to regulate volatility,” the WTM stated.

“SEBI can be wanting on the query of getting indices with futures and choices with very excessive concentrated weightages of some particular shares from a perspective of guaranteeing belief within the system,” Mr. Narayan added.

“Usually in social media, we hear murmurs that one thing unsuitable is occurring, particularly in index buying and selling. That there’s some manipulation occurring within the money market, which is resulting in some sort of exercise within the spinoff markets, and total, it’s creating…both enormous volatility or no volatility and that it’s being performed as a manipulation for some individuals to revenue,” he stated.

One of many questions SEBI is grappling with is whether or not there needs to be restrictions on how a lot weightage the highest inventory or the highest three shares have within the F&O indices.

“…these are a few of the issues that are on our thoughts. What you’ll discover is all of those are largely – both ease of doing enterprise when it comes to growing limits, growing the scope of what could be performed, or within the nature of constructing positive all of us measure our dangers higher,” he stated.