SEBI May Review Weekly Option Products To Curb Market Speculation
The change in trend in the derivatives market is worrying due to increased activity in weekly options product and increased speculative activity in the weekly option and expiry day trades.
The Securities and Exchange Board of India on Thursday said that it is open to review the weekly options derivative products if required to reduce speculative trading in the market and systemic risks.
Maybe we should relook at the products.Madhabi Puri-Buch, Chairperson, SEBI at the media interaction after the Board meet
The decision to review weekly options, if any, will be based on the recommendation of the working group under the secondary market advisory committee.
The regulatory concern emanates from three issues, she said. First, the issues of systemic risks. Currently, the system is well-protected and the regulator will continue to enhance risk management.
Secondly, from an investor protection point of view, the regulator has stated that nine out of 10 investors lose money in the derivative trade. The change in trend in the derivative market is worrying due to increased activity in weekly options product and increased speculative activity in the weekly option and expiry day trades.
Thirdly, the concern comes from the macroeconomic policy point of view: the rising level of household savings moving to speculative derivative trade instead of capital formation in the cash market.
The market regulator has been monitoring the rising turnover in the derivative segment. It said that the options premium turnover has risen from Rs 4.5 lakh crore in 2018 to Rs 140 lakh crore in 2024. Overall derivative turnover has risen from Rs 210 lakh crore to Rs 500 lakh crore during the same period, while the share of individuals in options trading has risen from 2% to 41% in the last six years.
Wide Mandate
SEBI has through its secondary market advisory committee created an expert working group with wide mandate to look at the risk management and measures that can be undertaken to reduce speculative activity in the derivative trade.
The working group will submit its findings to the secondary market advisory committee, which will be presented to the regulator to be put up for consultation process. There is no timeline for the working group to submit its report, said the SEBI chairperson.
