Das said it was also not the case of all household savings going into the futures & options (F&O) segment. He was speaking to the media during a press conference where he addressed questions on the monetary policy announcements made earlier on Thursday.
“In F&O, people are looking only at the margins…it is not as if the entire savings amount is going into the F&O so that is something on F&O that we have to remember. Whatever views we had, we had discussed it with the Sebi…you know…the warning group that we have among the regulators…there is something called the early warning group, it has been discussed. We have put forth our viewpoints there. Sebi has taken note of our viewpoint…Sebi has made its own analysis and any further steps based on the discussion paper and the inputs they get, Sebi will take appropriate action,” Das said.
In June, the RBI Governor had expressed his concerns on the matter, saying that volumes in the derivatives market have perhaps become larger than the nominal GDP of India.
The heightened activity of retail traders, most of whom are making losses in the futures and options (F&O) market, caught the attention of regulators with an early warning group of Sebi and RBI monitoring it.”The early warning group is monitoring that. Sebi and the Reserve Bank, together we are monitoring that…Sebi has taken a few measures and they are examining it and I think they will deal with it,” Das had then said at an ET Now Leadership Dialogues.On July 30, Sebi released a consultation paper seeking comments on seven proposals, which included increasing the minimum contract size for F&O to Rs 20 lakh and limiting weekly options contracts.The regulator has been raising concerns over youngsters indulging in gambling household savings in the high risk-high return world of derivative trading, highlighting that 92.5 lakh retail traders and proprietorship firms incurred a trading loss of Rs 51,689 crore in FY24.
Among other measures proposed by the market watchdog, are rationalisation of options strikes, upfront collection of options premium, removal of calendar spread benefit on expiry day, intraday monitoring of position limits, rationalising of weekly options and increase in margin near contract expiry.
While derivatives market aids better price discovery, risk management and improved liquidity, heightened participation by retail traders and investors have made regulators raise red flags. The retail interest is so high that Indian markets account for 30% to 50% of global exchange-traded derivative trades. And 89% of them are minting losses, according to an earlier survey by Sebi.
The loss of Rs 51,689 crore made by retail traders and prop desks during FY24 in index derivatives is over 32% of the net inflows into growth and equity oriented schemes of all mutual funds during FY24.
Earlier in the month, the Economic Survey had also warned against F&O trading saying that such speculative trading has no place in a developing country like India and even equated it with gambling.
Moreover, in the Union Budget, Finance Minister Nirmala Sitharaman hiked securities transaction tax (STT) on securities to 0.02% in futures and 0.1% in options.
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