F&O cannot be a national pastime: Sebi whole-time member Ashwani Bhatia

Warns Sebi whole-time member Ashwani Bhatia as regulator takes steps to curb frenzy in derivatives segment

Even as the Securities and Exchange Board of India (Sebi) has taken steps to curb the frenzy in the derivatives segment, its whole-time member Ashwani Bhatia said that “futures and options (F&O) cannot be a national pastime” in a cautionary tone to retail investors.

Speaking at the 14th Morningstar Investment Conference here, Bhatia added that India accounted for the highest share in volumes in F&O globally but it is a crown that “we do not wish to wear.” 

“There is a saying uneasy lies the head that wears a crown. India accounts for the largest volume of F&O globally. We are number one and globally also more than 50 per cent of the F&O volume happens in India. F&O cannot be and should not be a national pastime which actually means that savings of retail participants move into the pockets of institutional hands,” said Bhatia.

The market regulator’s recent six-step measures for index derivatives is aimed at reducing retail participation by increasing the contract size and lowering the number of weekly contracts of index options. A majority of the steps (three) will kick in from November 20.

However, he called for higher retail participation in the mutual fund sector and overall in wealth creation through the securities market along with the need for more investor education.

The whole-time member also cautioned retail investors on the quality of small and medium enterprises (SMEs) lining up for initial public offerings (IPOs).

Sebi is expected to float a consultation paper on steps to strengthen the eligibility criteria, disclosure requirements, standardisation in the process, and onus on intermediaries.

The discussion paper will be issued this month, Bhatia said.

“What we have seen is pretty disturbing. The way retail participation is happening (in SME IPO), the number of times IPO issues are oversubscribed and the way underwriting happens. Obviously we do not feel very comfortable about what is going on,” said the Sebi official.

Bhatia said that debt issuance has seen around 18 per cent increase in H1FY25 year-on-year (Y-o-Y) with around ~5 trillion raised till now this financial year. Last year, total funds raised through debt issues stood at ~8.6 trillion.

He also called for more issuances of municipal bonds for which municipalities will have to step up and have double-entry book keeping.