Sebi receives suggestions from 6,000 stakeholders on discussion paper on F&O trading

Capital markets regulator Sebi has received suggestions from around 6,000 stakeholders on the consultation paper floated on Futures & Options (F&O) trading, its chief Madhabi Puri Buch said on Thursday. In its consultation paper floated in July, the regulator proposed seven measures, including increasing minimum contract size and upfront collection of option premiums, intra-day monitoring of position limits, rationalization of strike prices, removal of calendar spread benefit on expiry day, and increase in near contract expiry margin.

These measures are aimed at enhancing investor protection and promoting market stability in derivative markets. Speaking at Global Fintech Fest 2024, Buch said that the regulator has received comments from around 6,000 stakeholders on the consultation paper on the F&O segment. Also, technology has validated faster processing of such enormous amounts of feedback.

Additionally, she said that the Securities and Exchange Board of India (Sebi) is working on several dozen Artificial Intelligence (AI)- powered technologies, which are aimed at improving surveillance and processing using AI. Earlier this month, Sebi Whole-Time Member Ananth Narayan G stated that the "primary intent" of the capital markets regulator in trying to restrict derivative trades is to curb the "expiry day frenzy" in options trading. He had made it clear that it is not Sebi's intent to ban derivatives.

Previously, Sebi Chief mentioned that households are losing up to Rs 60,000 crore a year in the problematic futures and options segment. Earlier, Sebi research showed retail traders lose money in nine out of 10 trades in the F&O segment. The government, in the Union Budget in July, raised the securities transaction tax (STT) on both futures and options trade from October 1 to allay concerns about hyperactive interest in the derivative segment.

Before that, the Economic Survey flagged concerns over rising retail investors' interest in derivative trading. The survey stated that speculative trade has no place in 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.