Speaking in Mumbai on Wednesday, Securities and Exchange Board of India Chairman Tuhin Kanta Pandey said the regulator was prioritising margin relief to deepen and expand the long-term derivatives market. “The focus is on providing margin relief to expand the market,” he said.
The shift comes after SEBI imposed curbs that restricted weekly contract expiries, raised minimum contract sizes and required higher upfront margins. Margin relief means regulatory concessions that reduce the upfront capital traders and institutions must set aside for derivatives positions.
The restrictions have had some effect, Pandey said. “Regulatory measures have had some impact on options trading.” Yet the market has continued to lean towards options trading, according to Pandey.
SEBI’s own data shows that options trading continues to produce significant losses on Dalal Street. Its studies have found that an overwhelming majority of individual retail traders make net losses in options trading.
Pandey warned that short-term options trading remains a high-risk area for individual investors. “We need to examine how to tackle this situation... Effective price discovery remains an essential task,” he said.
SEBI is trying to steer liquidity towards longer-term contracts used for genuine hedging and investment needs. Pandey also said commercial banks and capital markets have complementary roles in meeting the nation’s credit and capital requirements. “Finance is essential for both SMEs and large companies,” he said.
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