New Delhi: Capital markets regulator SEBI may soon take steps regarding the futures and options (F&O) segment to increase investor protection. A senior official gave this information on Tuesday. Additionally, SEBI has also urged the government to provide tax exemption to subscribers of municipal bonds, which is important for financing infrastructure development.
Whole-time member of the regulator, Ashwini Bhatia, said that the regulator will raise the issue of tax exemption for municipal bonds in the meeting with the Finance Commission. Various municipal corporations have raised Rs 2,700 crore through bonds since 1997 for infrastructure projects.
On F&O, Bhatia said, “SEBI is going to do something about F&O very soon. (Recently) a study has come out.” The regulator in its recent consultation paper has proposed seven measures to tighten the rules for index derivatives. These include revising the minimum contract size and requiring advance collection of option premium, ‘intra-day’ monitoring of position limits, rationalizing ‘??strike’ prices, removing ‘calendar spread’ benefits on the expiry day and closer contract expiry. Involves increasing profits.
If these measures are implemented, it will improve risk management and increase transparency in the derivatives market. In its consultation paper, the regulator had suggested revising the minimum contract size for index derivatives in two phases keeping in mind the market growth.
The minimum contract value at the beginning of the first phase should be between Rs 15 lakh to Rs 20 lakh. After six months, in the second phase, the minimum price will be between Rs 20 lakh to Rs 30 lakh. The current minimum contract amount ranges from Rs 5 lakh to Rs 10 lakh, which was last set in 2015.
A recent study by SEBI had revealed that 93 per cent of over one crore individual F&O traders suffered an average loss of about Rs 2 lakh per trader (transaction cost) in the three years from FY 2021-22 to FY 2023-24. Including). The cumulative losses of individual traders exceeded Rs 1.8 lakh crore in the three-year period between FY 2021-22 and FY 2023-24. The report also highlighted the increase in the number of individual investors making losses in F&O.