Sebi open to taking F&O products off the shelf; expert panel to assess move

Will be guided by recommendations of expert group

The Securities and Exchange Board of India (Sebi) is open to taking down stocks and indices from the thriving futures and options (F&O) segment, amid growing concerns over retail losses in the derivatives segment.

The market regulator will be guided by suggestions and proposals made by an expert panel set up to assess the risk related to F&O trading. 

Sebi chairperson Madhabi Puri Buch on Thursday said the regulator has seen the trend of rise in trades in the last hour on the expiry day. 

On queries whether the regulator will be open to removing any derivative products, Buch said they would do "whatever would be required".

“We have no preconceived notions...If that is what is required (removal of an options product) and that is the considered view of the committee and we agree with the rationale and logic, then why not,” said Buch. 

When asked if this could go against the business interests of stock exchanges and brokerages, she said, “For any regulated entity, there is always a regulatory risk. It is a reality and part of the business. Investors also understand this. It is not peculiar only to India and it is true for all sectors."

Some industry participants echoed similar views. 

“Regulatory risk is the biggest risk for any regulated business. We are in the middle of a period of excess in options trading. We have been a big beneficiary of this jump in volume but have always been aware that it can be significantly reduced in size due to regulations, which can significantly hurt revenues, and that's also why we have never made any forward projections,” Nithin Kamath, founder, and chief executive officer, Zerodha, wrote on X. 

“Times will be tough for the broking industry going forward because almost everyone's business model is skewed towards earning from options,” he added. 

According to data shared by Sebi, turnover in index options (premium) has surged from Rs 4.6 trillion in 2018 to Rs 140 trillion in 2024, while the share of retail investors has surged from 2 per cent to 41 per cent during this period.