Shutdown of weekly options not practical, says Sebi Chairman

Synopsis

India's market regulator Sebi will proceed cautiously on restricting weekly futures and options expiries. Sebi chief Tuhin Kanta Pandey stated an outright shutdown is impractical. The regulator has already implemented measures to control speculative trading by retail investors. Further policy interventions will follow extensive data analysis and public consultation.

Mumbai: The Securities and Exchange Board of India (Sebi) will adopt a cautious approach to the issue of curbing weekly futures and options expiries, its chief Tuhin Kanta Pandey said on Friday.

"This (weekly derivatives expiries) is a very sensitive subject and also has a lot of nuances. There has been a problem in the derivatives market, which has been highlighted by Sebi itself," Pandey said. He was speaking at a Business Standard event.

He added that an outright shutdown of weekly options would not be "practical".

"Need to see irrational exuberance is in control for smaller or less savvy market participants. How can we shut down the market just like that? Many market participants are using this," he said.

Pandey said the regulator has already taken a series of measures - including restricting the number of expiry days and limiting trading to one index on a given day - to curb excessive speculative trading by retail investors in the derivatives segment.

He added that some of these measures have already kicked in, while others will become effective from December. A research study conducted by Sebi showed that over 90% of individual traders in the futures and options segment lose money.

Pandey said Sebi will continue to analyse data before considering any new policy interventions.

"Any further development, we will put it out in the form of a public consultation so that everyone can then chew on that, and we will also do further data crunching on that," he said.

Meanwhile, the Sebi chief also said that an expert panel set up to address concerns over conflict of interest among Sebi board members will submit its report by November 10.

The committee was constituted after allegations of conflict of interest were levelled against former Sebi chairperson Madhabi Puri Buch by the now-defunct US-based short-seller Hindenburg Research.

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