Futures & Options Segment: The losses being incurred by investors in futures trading in the stock market has raised concerns of regulators as well as the government. SEBI Chairperson Madhabi Puri Buch said that the country’s families are losing up to Rs 60,000 crore annually in the futures and options segment. The SEBI chief expressed surprise and said, why should such a deal not be called a big issue in the derivatives markets.
Addressing an event at the National Stock Exchange, the SEBI chairperson said that investors are losing Rs 50,000 to Rs 60,000 crore annually in futures and options. She said that this money could have been used by investing in productive places like IPO or mutual funds. She asked why this is not becoming a widespread issue? Recently, SEBI has said in its survey that investors are facing losses in 90 percent of the deals in futures and options.
SEBI has decided to tighten the derivatives regulation so that there can be stability in the market and at the same time the interests of small investors can be protected. Taking a big step in this direction, SEBI has issued a consultation paper on 30 July 2024, in which suggestions have been given on ways to limit the activity of derivatives trade. In this consultation paper, it has been suggested to increase the contract size by four times and also to reduce the number of weekly contracts with immediate payment of option premium. Currently, index-based contracts expire every day. SEBI has suggested expiry of weekly contract of an index of the exchange. If this is accepted, then there will be two expiries in a week. Last month, SEBI had constituted an expert committee to give suggestions to curb this.
SEBI Chairperson said, although the stock markets will get less charges due to the reduction in derivatives trade, it will be beneficial for all stakeholders in the long run. She said, Exchange-Traded Funds (ETFs) cannot be an alternative to risky derivative activity for investors because their liquidity and profitability are very different.
Madhabi Puri Buch ruled out the possibility of using the same KYC verification as for bank customers to invest in mutual funds and said that SEBI will never allow Paytm-like fraud in the securities market. She said, we all saw what happened in Paytm.
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