Households are losing up to Rs 60,000 crore annually in the futures and options segment, prompting Sebi chairperson Madhabi Puri Buch to reiterate his concerns that this could be a 'macro issue'.
"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 at a NSE event in Mumbai.
Sebi, in a consultation paper released on July 30 - details of which were reported first by Moneycontrol - has proposed tighter derivatives regulations to boost market stability and protect small investors.
Buch had earlier as well said that the regulator is worried not only from a "micro-level," where the nature of F&O trading might put individual investors at risk, but also from a "macro-level," where it could potentially disrupt overall economic growth.
A study conducted by SEBI previously indicated that 90% of trades in the F&O segment resulted in losses. In response, the capital markets regulator issued a consultation paper on Tuesday, proposing measures to curtail such activities.
The turnover in index options, measured in premium terms, has surged dramatically from Rs 4.5 lakh crore in 2018 to Rs 140 lakh crore in 2024. Meanwhile, the overall turnover in the derivatives segment has increased from Rs 210 lakh crore to Rs 500 lakh crore during the same period. Additionally, the participation of individual investors has seen a substantial rise, growing from 2% to 41%.
More than seventy percent of individual investors in the equity cash segment incurred losses in FY23, a study recently conducted by capital markets regulator Sebi had found.
When asked if a bank customer can use the same KYC (know your customer) validation to invest in mutual funds, Buch reminded of the banking system's troubles with Paytm crisis. "We will not allow for a Paytm-type contamination in our market", she said.
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