Securities and Exchange Board of India (SEBI) Chairperson Madhabi Puri Buch on Friday said the surge in futures and options (F&O) trading volume has become a macro issue, according to a report.
“F&O volume surge has now become a macro issue and not just a micro issue of investor safety,” a PTI report quoted the chairperson of SEBI as saying. “Time to consider if household savings are going into speculation instead of capital formation,” she said.
The Reserve Bank of India (RBI) recently released a bi-annual Financial Stability Report (FSR) showcasing the rise of derivative market trading in India in June 2024. The sudden rise in trade volumes in the F&O market can bring forward several challenges for retail investors not following risk management practices, reported PTI.
The equity derivatives segment noticed growing participation from traders, rising 42.8 per cent to touch 95.7 lakh in the financial year 2023-24, as compared to 65 lakh in 2022-23, according to the report.
“Since derivatives are more complex than the underlying, investor protection is a key regulatory imperative,” according to the central bank’s FSR report.
SEBI chief Buch also highlighted that there is “no reason to be concerned about market valuations from a regulatory stance at the moment.”
Talking about SEBI’s recent consultation paper to allow mutual funds to offer new asset classes, Buch said that it will be allowed.
Buch sees mutual funds as a “safe space” to offer trading in derivative products. “Thought it would be more prudent to allow derivative products within safe space offered by MFs,” Buch said.
A PTI report in June said the capital market watchdog had instituted an expert working group under the Secondary Markets Advisory Committee to review India‘s F&O market from an investor safety point of view as well as with an overall risk management system.
