SEBI Expert Panel Tackles Investor Risk in Derivative Trading

A SEBI-appointed expert group is discussing seven proposals to address regulatory issues and protect small investors in exchange-traded derivatives. The panel aims to recommend strategies to bolster investor protection and improve risk metrics in the derivatives market. Final recommendations will be made by the Secondary Market Advisory Committee.

A SEBI-appointed expert group on exchange-traded derivatives is examining seven proposals aimed at addressing regulatory concerns and safeguarding small investors, sources revealed. The panel will recommend short-term strategies to enhance investor protection and improve risk metrics in the derivatives market, according to insiders.

The group will scrutinize the benefits and drawbacks of each proposal, focusing on protecting small investors in futures and options (F&O) trading. Citing that nine out of ten small investors lose money in F&O, a source noted the recommendations would be considered by the Secondary Market Advisory Committee for a final decision.

Among the proposals are rationalizing or limiting weekly options, adjusting strike prices of underlying assets, and removing calendar spread benefits on expiry day, sources said. Other suggestions include upfront collection of option premiums, intra-day monitoring of position limits, increasing lot sizes, and hiking margin requirements near contract expiry.

(With inputs from agencies.)