Market experts react to Sebi’s proposed rules to curb F&O speculation – CNBC TV18

Market experts react to Sebi’s proposed rules to curb F&O speculation – CNBC TV18

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The market regulator Securities and Exchange Board of India (Sebi), in a consultation paper released on July 30 proposed tighter derivatives trading rules to boost market stability and protect small investors. The move comes as part of the capital markets regulator’s attempts to create a stable and transparent trading ecosystem.

In a discussion with CNBC-TV18, labelling the consultation paper as a “retrograde move,” Rajesh Baheti, MD, Crosseas Capital Services, stated that they are against it.  “Rather than asking exchanges to choose a contract, we could have simply said you can have one expiry day for all your weekly contracts,” he added.

According to the consultation paper, SEBI is seeking to revise the minimum value of the derivates contract to ₹15 and ₹20 lakh against the current ₹5 lakh to ₹10 lakh. It also states the weekly options contracts are to be provided on a single benchmark index of an exchange.

“For example, if I have 100 of capital, I cannot go on using it for different contracts on different days. I cannot rotate it on expiry days every day of the week. If all expiry, let us assume, is on Thursday, then I have to decide if I want to do the Bank Nifty or the Nifty and that would have allowed these indices to be liquid or reasonably liquid and still exist. So you are kind of shutting down 60% or 70% of NSE’s business in the expiries because the most interest is in the weekly’s,” says Baheti.

However, unlike Baheti, Nilesh Sharma, President & ED, SAMCO Securities, is awaiting the release of the circular.

“There would be an impact on volumes per se, because currently, every single day of the week has an expiry. The point is that in expiries, other than benchmark index expiries, the volumes are not so high. Due to the low volume, there can be speculative activities that can go against the retailers and that is what SEBI is trying to curb so that the retailers don’t get impacted due to the higher speculative activity. The only thing is that this will have an impact on the volumes. However, I am not very sure how it will have an impact on retail profitability.”

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