No further tweaks to derivatives segment, says Sebi Wholetime Member Ananth Narayan

Sebi not mulling any steps on "suitability and appropriability", which will determine who can trade in the derivatives market

Mumbai: The capital markets regulator is not planning any more measures to curb or restrict activity in derivatives, Sebi’s Wholetime Member Ananth Narayan said on Saturday.

An expert group under former RBI executive director G Padmanabhan continues to work on bettering the system, and some moves on ease of doing business and better risk management are being mulled, he added.

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“At this point in time, there is no thought of Sebi taking any further steps in this particular regard,” Narayan said, addressing an event organised by Sebi-promoted NISM here.

He also made it clear that the Sebi is not mulling any steps on “suitability and appropriability”, which will determine who can trade in the derivatives market.

It can be noted that in November, Sebi imposed a set of restrictions to curb highly speculative trades in the futures and options market after data pointed out that retail investors lost money in 93 per cent of the trades over the last three years.

Making it clear that Sebi has nothing against derivatives and that they help in price discovery and deepening the market, Narayan assured that the tweaks will be introduced only after consultations.

Some of the measures being discussed within the market regulator include steps to better measure risk in the derivatives market.

“What you need ideally is that the volumes in the cash market should be nice and liquid, and there should be depth in the market. And likewise, the volumes in the derivative market should also have depth, should also have good volumes,” he noted.

It is important to make sure that there is some kind of connectivity in the liquidity of the two markets, he said.

“What is very clear to us is the current way of measuring open interest as notional of futures and notional of options is simply not right. It gives a very, very wrong picture, and there is a need to debate how we move forward into a more meaningful metric,” he said.

Narayan said the Sebi is also considering linking market-wide position limits to delivery volumes.