Sebi Says No Change In Filters For Now

The Securities and Exchange Board of India (Sebi) is examining the issue of whether there can be separate risk management regimes for the ordinary segment and the derivatives segment as a measure to address the problems peculiar to derivatives trading. This is particularly relevant in the context of the impact of circuit-filters on index stocks.

This is one of the issues being looked at against the background of the problem concerning circuit-filters, where derivatives trading can be affected owing to circuit-filters in the index stocks. A problem which has arisen is that if circuit-filters are imposed on some

stocks comprising either the BSE Sensex or the S&P CNX Nifty, trading on these indices will get affected since those stocks would be frozen.

 

As a possible way out, one option could be to have different rules for the ordinary trading segment and another for the derivatives segment. The risk containment panel is currently examining a slew of options, one of which is to do away with circuit-filters altogether for index stocks. However, there has been no decision on Sebi's part on this front. Sebi chairman D R Mehta said: "We are examining also whether there can be separate rules for the two segments. No decision has been taken. And as of now, there is no change in the circuit-filter mechanism of 8+4 anyway."

The risk management panel is also examining whether circuit-filters can be done away with in the rolling settlement mode, since that would then serve to attract greater volumes. There is one argument that rolling settlement stocks generally witness a fall in volumes.

However, sections of the market are also putting up other allegations against the circuit-filter mechanism, saying some bourses do not bother to follow the norms on that front. Operators say some of the smaller bourses do not follow the 30-minute rule between imposing the 8 per cent freeze and the 4 per cent limit, and sometimes they manually increase the time period or decrease it. A section of the market has been calling for Sebi to take a detailed look into these manipulations at the bourses.