 |
|
The Securities and Exchange Board of India (SEBI) has proposed a series of measures to curb speculative trading in the futures and options (F&O) segment of the Indian market. The most significant proposal is a six-fold hike in the minimum contract value for index derivatives, increasing it from Rs 5 lakh to Rs 30 lakh. This move is intended to deter traders with limited capital from engaging in high-risk speculative activities.
The rationale behind SEBI's proposed measures stems from concerns about excessive speculation in the F&O market. Government officials and the regulator have been expressing alarm over the rapid increase in F&O trading volumes, warning that it could negatively impact the economy. The proposed hike in minimum contract value is a direct response to these concerns, aiming to limit the participation of small-time traders who might be drawn to the market by the prospect of quick profits but lack the financial resources to handle potential losses.
Beyond the minimum contract value hike, SEBI's consultation paper outlines several other measures. The regulator proposes to limit the number of strike prices available on the expiry day, recognizing that excessive strike prices can facilitate manipulative trading practices. Additionally, brokers will be required to collect options premiums from clients upfront, eliminating the current practice of intraday leverage using broker funds. This move is aimed at reducing the level of risk associated with F&O trading and promoting a more responsible approach to market participation.
The proposed measures have drawn mixed reactions from market participants. While some welcome the efforts to address speculative excesses, others are concerned about the potential impact on market liquidity and the ability of smaller investors to participate in the F&O segment. The consultation process will allow stakeholders to voice their opinions and contribute to the finalization of the regulatory framework.
SEBI's proposals underscore the importance of maintaining a balance between fostering market growth and protecting investors from undue risk. The regulator's intention is to create a more stable and sustainable F&O market, one that supports genuine investment and discourages reckless speculation. The success of these measures will depend on their effective implementation and the willingness of market participants to adhere to the new regulations.
Source: Sebi: Sebi proposes 6x contract value hike to curb F&O speculation