Trading in F&O on or near expiry is a casino-like gamble, the brain behind the Sebi consultation paper says – CNBC TV18

Trading in F&O on or near expiry is a casino-like gamble, the brain behind the Sebi consultation paper says – CNBC TV18

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The brain behind the recent consultation paper from India’s securities market regulator on Futures & Options has called trading in F&O on or closer to expiry a casino-like gamble. Ananth Narayan, a whole-time member of the Securities and Exchange Board of India (SEBI), also hinted at more action to curb speculation.

“Trading in F&O on or closer to expiry seems like a casino machine… People are looking to hit a jackpot by trading closer to or on expiry day. If there was a black swan-like event on expiry day, it could be disastrous,” he said at FICCI’s 21st Annual Capital Markets Conference (CAPAM2024) in Mumbai.

He said the F&O lot size has been “reset just keeping in mind how the markets have grown in size”.

The market regulator, in a consultation paper released on July 30 proposed tighter derivatives trading rules to boost market stability and protect small investors. According to the paper, Sebi is seeking to revise the minimum value of the derivates contract to ₹15-20 lakh against the current ₹5-10 lakh. It also states the weekly options contracts are to be provided on a single benchmark index of an exchange.

Read more about the Sebi F&O consultation paper here


Narayan said that the steps suggested in the consultation paper may “not be the end of it”, and the regulator will monitor the market closely. “Will take fresh steps both on the development and regulation side on F&O if required,” he said.

The consultation paper on the F&O market suggesting seven steps are immediate-term measures suggested by the committee, Narayan said, adding that the committee has also proposed some long-term measures.

“Long-term measures on F&O are around risk management, cash-derivative balance. No thought or proposal to curb intra-day equity cash market trading.”

The study on intraday equity cash market trading was released for academic purposes, he said.

Earlier during her address, Sebi chairperson Madhabi Puri Bunch, clarified that the regulator has not come out with final regulations on F&O trading.

“This is just a draft circular on F&O trading. Will wait for stakeholders’ views,” Buch said.

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