Sebi chief Madhabi Buch says need more room for improvement in F&O

SEBI chairperson Madhabi Puri Buch

The Securities and Exchange Board of India (Sebi) formed an expert working committee to look at F&O trading from three dimensions--one of developing the segment, two is investor protection, and three from risk management, said Sebi chairperson Madhabi Puri Buch in a board meeting dates June 27.

Speaking about the concerns of F&O trading, the chairperson said, "There is a systemic risk in the capital market ecosystem itself. Are we running a risk of a black-swan event? We think we are reasonably well protected. But there is always room for improvement."

On the investor protection front she said, "The trend we are seeing in the nature of trading is concentrated in weekly options only on expiry day... these are speculative bets, no hedging. No nature other than speculation." This was after Sebi published a report which said 9 out of 10 people lose money in F&O trading. She said, "The question is what needs to be done for investor protection, particularly since we have heard of people borrowing money for this speculative activity."

Buch also said that a large amount of money is going from household savings into non-productive economic activity.

Buch said that turnover in index options in premium terms has gone up from Rs 4.5 lakh crore in 2018 to Rs 140 lakh crore in 2024. While overall turnover in derivative segment has gone up from Rs 210 lakh crore in 2018 to Rs 500 lakh crore in 2024. And the share of individual investors has gone up from 2 percent to 41 percent in the same period.

The SEBI decisions come at a time when the National Stock Exchange (NSE) and BSE are already occupying the world’s top two positions in terms of F&O volume, with the combined volume of the two Indian stock exchanges accounting for more than 80% of the global turnover in the month of April.

Data from the Futures Industry Association shows that a total of 8,484 million contracts were traded on NSE in April, which was the highest among all global bourses. NSE was followed by BSE that saw a little over 2,224 million contracts changing hands in April.

Further, if the year-on-year growth is taken into account, then NSE registered a 92 percent rise. BSE’s rise is not exactly comparable as the bourse saw an uptick in its F&O trading turnover only from May last year – prior to that it was hovering around near-zero levels.