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Informist, Saturday, Jan. 11, 2025

 

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--SEBI Narayan: Not contemplating on limiting who can trade F&O 
--SEBI Narayan: Always watchful of any signs of manipulations in fincl mkts 
--SEBI Narayan: Current way of measuring open interest in F&O not right 
--SEBI Narayan: Not thinking of additional steps in derivatives segment 
--SEBI Narayan: Seeing if we can measure risks better in derivatives market 
--SEBI Narayan: Losses mostly happening in index options on expiry day 
--SEBI Narayan: Research shows small derivative traders are losing money 
--SEBI Narayan: Need to be thoughtful about issues in derivatives 
--SEBI Narayan: Cannot close eyes on investor protection 
--SEBI Narayan: Derivatives help in price discovery, hedging 
--CONTEXT: SEBI Whole-Time Member Ananth Narayan at securities market event 
--SEBI Narayan: Derivatives good for market ecosystem

 

MUMBAI - The Securities and Exhange Board of India is not planning any additional steps for the derivatives market, Whole-Time Member Ananth Narayan said at the Symposium of Securities Markets on Saturday. In October, the regulator took several steps such as increasing contract size, reducing number of weekly expiries and upfront collection of premiums among others. He said the effect of these steps will be seen in the next 2-3 months.

 

"At this point in time, there is no thought of SEBI taking more steps...we are in no hurry to follow it up with any additional steps," he said. An expert committee is discussing steps that could help with better risk management and improve ease of doing business, he said.

 

The derivatives trading volume saw a 37% month-on-month decline in December after a slew of measures taken by the market regulator to reduce the frenzy in the derivatives segment.

 

As per a research conducted by the regulator, it was seen that the losses in the derivatives market were mainly in the index options on expiry day. It also said that the losses were mainly borne by the small derivatives trader.

 

Narayan said that SEBI was continuously monitoring painpoints in the derivatives markets and is thinking of certain guidelines which may help the process. Narayan said the current way of calculating open interest in derivatives market is wrong.

 

Currently, the open interest is calculated by adding notional open interest in options with notional open interest in futures. He said adding these two values are akin to "comparing apples and oranges" and that it doesn't have a direct correlation.

 

"You cannot add notional of future with notional of an option. At best you can add delta of an option with notional of a future," he said. This is something the expert committee is deliberating on, he said.

 

Apart from this, Narayan said SEBI was conscious of manipulations in the market. He said to deal with manipulation in the index, the expert committee is contemplating on limiting the weightage of top stocks in an index. 

 

Clarifying on market rumours, he said SEBI was not thinking of limiting who can trade in F&O and who cannot. He further said this is for the exchanges to decide. However, he said that the derivatives market is good and essential for capital formation. 

 

"Derivatives are good for the market. Derivatives aid in price discovery. They create depth in the market. They allow market participants to risk manage appropriately, including hedge positions or take action positions. Trading hedging derivatives are good for the ecosystem," he said.   End

 

Reported by Kshipra Petkar and Anshul Choudhary

Edited by Akul Nishant Akhoury

 

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