The Securities and Exchange Board of India (SEBI) is unlikely to rush into further action in the derivatives market until the impact of recent measures becomes clearer, Chairman Tuhin Kanta Pandey told businessline in an interview. “We should not be in a constant state of flux in policy in the space… stability is important,” the SEBI chief said, pointing that the concerns centred around options chiefly and not futures.
Edited excerpts
Market intermediaries feel that there is a need for further tightening regulations for derivatives trading to check retail speculation. What is SEBI’s view on this now and on further curbs?
We should not be in a constant state of flux in this area of policy. Stability is important. It should be uniform.
But it is not fair when people say F&O. I think we have to be cautious where the problem is. The problem is in the ‘O,’ including options, index options, weekly expiry and expiry days. So why cannot we say four words instead of just saying F&O. It is options.
We looked at the particular problem area and then we had certain measures for those problem areas. We are not going to do anything further till we have more data, till we have impact analysis of whatever measures we took. And then we will have to see whether we need to do more or not.
We brought in a future equivalent method in order to see if options also should be treated like futures. We also brought in position limits. There are position limits already there in the futures market, but we are not seeing very hyperactivity there. Where is the growth? It is only the options where all this is happening.
You have tightened regulations for SME IPOs but despite this, the segment continues to raise concerns. How is the regulator approaching the segment now?
We cannot paint everything with one brush because there have been hugely successful SMEs also. We also cannot create so much of a scare that even those capable are dissuaded.
It is a very large country. There are about six lakh MSMEs and even if a small percentage of them come to the market, that is still a large number. So the idea is not to discourage the segment but to improve the framework.
We have increased due diligence. There are site visits, monitoring. We are also looking into bringing in third-party monitoring through the LODR review. It is also important that we put a certain onerous responsibility on the merchant bankers because they are the ones bringing these companies to the market.
Has SEBI further discussed the issues in the conflict of interest report recommendations and the pushback from insiders?
It will be deliberated in the next board, on March 23. Many of these measures are very far-reaching and before introduction, the board would like to look at the rationale and representations given by staff, more closely.
It is for the board members to decide how much, or which recommendations to accept. Some recommendations in the committee are such that even we cannot deliberate and are for the government to decide. There are so many matters that we are keen to implement, so there will be some way forward in the next board meet.
Market intermediaries have flagged concerns over the RBI’s bank guarantee rules for proprietary trading. Will Sebi take this up?
That matter is with the Reserve Bank of India (RBI). When we looked at it, RBI had said no BG (bank guarantees) for proprietary trading and then they clarified that BG can be given for proprietary trading provided 100 per cent collateral is there.
Earlier, banks must have been lending against maybe 50 per cent collateral. Now that it is made 100 per cent, banks can still give it but obviously it becomes costlier and more difficult.