Sebi chairperson Madhabi Puri Buch on Tuesday said households are losing up to Rs 60,000 crore a year in the problematic futures and options segment.

Speaking at an event at the largest equity bourse NSE, Buch wondered why such bets in the derivative markets should not be called as a “macro issue”, as it had done earlier.

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Big Impact

“If Rs 50,000-60,000 crore a year is going away into losses in F&O whereas that would have been productively deployed as may be the next IPO round, maybe MF, to other productive purposes, why is that not a macro issue?” Buch said.

Sebi’s Concerns About the Futures and Options Segment

Sebi believes that a significant portion of the trading activity in the F&O segment is driven by speculation rather than hedging or risk management.

This can lead to increased market volatility and potential systemic risks.

Data suggests that a large number of retail investors incur losses in the F&O segment.

Sebi is worried about the negative impact of these losses on household savings and the overall financial well-being of investors.

A Sebi study had earlier pointed to 90 per cent of the trades resulting in losses. The capital markets regulator also came up with a consultation paper on Tuesday proposing ways to limit the activity.

Key proposals include; increasing minimum contract size, reducing the number of weekly options contracts, upfront collection of option premiums and limiting the number of strike prices on expiry day.

Responding to a question on the impact of such attempts to curb the fee-yielding trades, NSE’s chief executive and managing director Ashish Kumar Chauhan said it will abide by the regulations.

Buch said while there is a short-term trade-off for exchanges by way of fees impact, in the long term it will be beneficial to all the stakeholders.

She also said that exchange-traded funds cannot be an alternative or a replacement for the riskier derivatives activity for investors as the dynamics of liquidity and leverage are very different.

Meanwhile, to a question on whether a bank customer can use the same KYC (know your customer) validation for investing in mutual funds, Buch replied in the negative and referred to the banking system’s troubles with Paytm.

On fininfluencers, Buch said Sebi has identified difficulties in getting registered as an investment advisor being a detrimental factor and will soon be rationalising it.

She said that there are false claims being peddled by such platforms, and added that an entity from the NSE Group has showcased a performance validation mechanism and hinted that it will soon be implemented.

Buch said the Sebi management will also soon be taking a proposal to its board to make ASBA or application supported by blocked amount mandatory and added that to begin with, it can start with at least the qualified brokers.

There is a “misunderstanding” in the market about the investors not paying the broker to carry out transactions, she said, adding that brokers are getting Rs 2,800 crore from trades that will now get reclassified as broker fees instead of exchange fees.

(With PTI inputs)