Derivatives Trading Impacting Economy On Larger Scale, Says SEBI Chairperson

The increasing trading activities in the derivatives market are no longer just a concern for individual investors, according to the Securities and Exchange Board of India's Chairperson Madhabi Puri Buch.

Instead, they have grown to impact the overall economy on a larger scale, Buch said at an event organised by SBI Mutual Funds on Friday.

She, however, emphasised the importance of providing investors with necessary information and risk warnings but clarified that SEBI does not aim to overly regulate or control investors' decisions, as it is not a nanny regulator.

Buch explained that the significant growth in trading volumes in recent years has led to unforeseen consequences. She highlighted that the influx of young investors into speculative trading has resulted in substantial financial losses. This shift has prompted a shift in focus from merely protecting individual investors to considering broader economic implications. Buch emphasised the need for SEBI to continually reassess its regulatory approach based on data rather than dogma. 

While shedding light on other issues, the chairperson mentioned that while IPOs worth Rs. 40,000 crore have been approved and are waiting to be launched, another Rs. 80,000 crore worth of applications are present with SEBI.

Buch highlighted during her discussion that SEBI's 'new asset class' consultation paper was influenced by several factors. One significant observation was the unauthorised operation of portfolio management services by some brokers.

This discovery raised concerns about regulatory oversight and investor protection in this area. Additionally, SEBI identified a market gap existing between mutual funds and PMS, indicating a need for new investment avenues that could bridge this divide effectively.