India households are losing up to Rs 60,000 crore a year while trading in the problematic futures and options segment, announced Madhabi Puri Buch, Sebi chairperson on Tuesday.
A Macro Issue
Further, Buch wondered why such bets in the derivative markets should not be called a “macro issue”, as it had done earlier, while speaking at an event at the largest equity bourse NSE.
According to Buch, “If Rs 50,000-60,000 crore a year is going away into losses in F&O whereas that would have been productively deployed as may be the next IPO round, maybe MF, to other productive purposes, why is that not a macro issue?”
Proposing Ways To Limit Activity
A Sebi study had earlier pointed to 90 per cent of the trades resulting in losses. The capital markets regulator also came up with a consultation paper on Tuesday proposing ways to limit the activity.
Moving ahead, NSE’s chief executive and managing director Ashish Kumar Chauhan said it will abide by the regulations, while Responding to a question on the impact of such attempts to curb the fee-yielding trades.
And why not, while there is a short-term trade-off for exchanges by way of fees impact, in the long term it will be beneficial to all the stakeholders, said Buch.
It appears that the exchange-traded funds cannot be an alternative or a replacement for the riskier derivatives activity for investors as the dynamics of liquidity and leverage are very different, Buch noted.
Contamination In Market
While answering a different question on whether a bank customer can use the same KYC (know your customer) validation for investing in mutual funds, Buch replied in the negative and referred to the banking system’s troubles with Paytm.
Further adding, “‘We will not allow for a Paytm-type contamination in our market. We all saw what happened in Paytm. Because in the banking system, there is no KRA type system, the problem of Paytm stays in Paytm. It does not spread to other banks. But if we allow Paytm to come into our system, and no KRA, then it contaminates the whole system.”
Buch said, “We will always have our KRA sitting in the middle to see that things are validated. Otherwise, you will have a mischievous player coming and contaminating the whole system.”
