By Jayshree P Upadhyay and Ira Dugal
MUMBAI (Reuters) – India’s markets regulator will tighten by-product pointers to increase entry boundaries and make it dearer to commerce as a result of it tries to limit retail consumers speculating on harmful contracts, talked about 4 sources with direct data of the matter.
Securities and Exchange Board of India (SEBI) will prohibit the number of decisions contract expiries to 1 per change each week and nearly triple the minimal shopping for and promoting amount, the sources talked about, in pointers identical to these proposed in July, no matter pushback from retailers and brokers.
But SEBI will overview just a few of its earlier proposals to increase margin requirements and to look at intraday shopping for and promoting positions, primarily based on the sources.
Authorities have been flagging risks from speculative shopping for and promoting by retail consumers, who’ve been funnelling monetary financial savings into India’s booming decisions market.
The month-to-month notional price of derivatives traded was 10,923 trillion Indian rupees ($130.13 trillion) in August – the very best globally, data from the regulator confirmed. The largest share of shopping for and promoting is in decisions contracts linked to stock indices like BSE Sensex and NSE Nifty 50.
The share of specific individual consumers in index decisions has risen to 41% inside the financial yr ended March 2024 from 2% six years earlier, regulatory data confirmed.
“A key objective was to put an end to the large and rising speculative volumes in index options contracts close to expiry,” talked about the first of the sources, who all declined to be acknowledged because the alternatives aren’t however public.
“The regulator believes that this warrants additional measures both for small investor protection and for ensuring continued systemic stability,” the provision added.
The final pointers will seemingly be launched this month by a spherical, the sources talked about.
The particulars haven’t been reported beforehand. SEBI didn’t reply immediately to a request for comment.
The steps observe an increase in tax on by-product transactions in July supposed to chop again the participation of retail consumers inside the decisions market.
India’s finance minister flagged issues in May that any unchecked explosion of retail investor shopping for and promoting in derivatives may create future challenges for the markets, investor sentiment and household funds.
SOCIAL MEDIA CAMPAIGN
The regulator acquired nearly 10,000 suggestions on its July proposals from retailers and totally different market members after a social media advertising and marketing marketing campaign, the first provide talked about, together with an enormous majority of them have been from retailers and brokers who argued the regulator’s new pointers would hit shopping for and promoting earnings and liquidity.
“There was a social media campaign to overwhelm the regulator with the responses,” the provision added.
The final pointers will ask exchanges to chop again the number of contract expiries to 1 each week per change from various expiries at current that give retailers the prospect to take a position further, talked about the 4 sources.
SEBI will even enhance the minimal shopping for and promoting amount to simply about 1.5 million rupees to 2 million rupees ($18,000-$24,000) as proposed inside the July session paper from 500,000 rupees, the second of the sources talked about.
In its proposals, the regulator had steered elevated margins for contracts expiring on the an identical day, nonetheless solutions from the nation’s stock exchanges and market members talked about this may very well be powerful to implement.
This was an actual concern and the regulator would tweak the proposed hike in margins, the sources talked about.
Exchanges and depositories moreover raised issues over intraday monitoring of positions in index derivatives as a consequence of an absence of technical performance and the regulator might not insist on it for now, the third of the sources talked about.
($1 = 83.9370 Indian rupees)
(Reporting by Jayshree P Upadhyay and Ira Dugal in Mumbai; Editing by Jamie Freed)
