SEBI to maintain ‘status quo’ on derivatives; root cause analysis underway in NSDL glitch, says Chairman

SEBI to maintain ‘status quo’ on derivatives; root cause analysis underway in NSDL glitch, says Chairman

• SEBI maintains status quo in derivatives amid speculation concerns
• NSDL glitch resolved; corrective steps planned for system upgrades
• SEBI pushes for Regulatory Impact Assessment and simplified regulations

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Market regulator Securities and Exchange Board of India (SEBI) will maintain a ‘status quo’ in the derivatives segment for now, even as questions persist over speculation in futures and options (F&O). Speaking at the 6th Annual International Research Conference of NISM in Navi Mumbai, Pandey declined to comment on the Revenue Secretary’s recent remark that steps taken to curb excess speculation were ‘modest’. In Union Budget, government has announced steep hike in Securities Transaction Tax (STT). He said that from SEBI’s side, “we are currently at whatever is the status quo,” indicating that no immediate additional measures or relaxations are being contemplated. He also refrained from commenting on proposals such as introducing options in the commodities market.

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On the recent NSDL technical glitch issue, Pandey said SEBI had monitored the developments closely. He explained that, as per regulatory protocol, a root cause analysis is being done, which will be placed before SEBI’s Technical Advisory Committee (TAC). Based on its findings, short-, medium-, and long-term corrective steps will be taken, including system upgrades or vendor-level interventions where necessary, particularly in the context of growing market complexity and legacy software challenges. He said the settlement backlogs that spilled over for a couple of days were completed over the weekend, and systems have been functioning normally since Monday.

Pandey said, “We do have complexities, and complexities are also growing. And the complexities need to be managed through a proactive approach, understanding when a certain glitch occurs, but dealing with this in a patient, calm manner with due cooperation because the system is interconnected. So, therefore, that has happened, and I think that work was very good.”

He noted that legacy software systems can sometimes develop glitches as markets grow and evolve. Therefore, institutions need to regularly upgrade their systems and proactively identify and address such issues to ensure smooth functioning.

He commended exchanges, depositories, clearing corporations, and brokers for working round the clock to prevent panic and ensure proper time-stamping so that corporate actions were not adversely affected.

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Pandey also highlighted SEBI’s push towards instituting a formal Regulatory Impact Assessment (RIA) framework, in line with the Finance Minister’s Budget announcement. A committee chaired by the Chief Economic Adviser has been constituted to guide how such assessments should be conducted. Within SEBI, a unit has been set up under the Department of Economic and Policy Analysis (DEPA), and a Centre for Regulatory Studies is being established at NISM. The effort will study global practices but develop an India-specific model, with collaboration from research institutions and policy schools.

Pandey said the cost of capital is a critical factor for productive sectors and must come down, stressing that access to finance should be both adequate and affordable. He added that SEBI’s regulatory measures must remain cost-efficient, as excessive compliance burdens in terms of time and money can undermine overall competitiveness. Pandey said, “There is always a cost of regulation, and I have stressed it before that we need to simplify the regulation while maintaining its objective.”

Pandey reiterated that SEBI is discussing with other regulators how investors can get a statement of all their investments in one place. Pandey said, “We will also take it up with other regulators to ensure that we reach a situation where, subject to, of course, your willingness, you should be able to get a consolidated statement of financial assets across other regulators too, like pensions, NPS, insurance, and maybe banks. But this is an ongoing process with us, with our discussions with the regulators.”