The Securities and Exchange Board of India (SEBI) is planning significant regulatory adjustments aimed at mitigating the risks associated with derivative trading. This move comes in response to a surge in trading activities, particularly in the options market, which saw a record 108 billion contracts traded globally in 2023, with 78% of these on Indian exchanges.
SEBI's proposed changes include higher margins for options contracts and enhanced disclosure requirements for retail investors. The focus is on trades below ₹1 million, which accounted for 78% of the transactions on the National Stock Exchange (NSE) in April. Retail investors, who contribute to 35% of India's derivatives trading, are a primary target of these regulatory updates.
"While the growth in retail participation is encouraging, it also necessitates stronger regulatory frameworks to protect investors and maintain market integrity," a SEBI official stated.
The market's exponential growth has raised concerns about potential systemic risks. By imposing higher margins, SEBI aims to curb speculative trading and enhance market stability. This step aligns with global trends where regulatory bodies are tightening controls to safeguard markets against excessive volatility and financial instability.
Industry experts believe these measures will foster a more transparent and resilient trading environment, ensuring that retail investors are well-informed and protected against undue risks.
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