SEBI Chairperson Madhabi Puri Buch has reported that households are losing up to ₹60,000 crore each year due to problematic futures and options (F&O) trading.
Mumbai, July 30 (PTI) — SEBI Chairperson Madhabi Puri Buch announced on Tuesday that households are losing up to ₹60,000 crore annually due to issues in the futures and options (F&O) segment.
Speaking at an event hosted by the National Stock Exchange (NSE), Buch questioned why such losses in derivative markets are not considered a “macro issue,” given the significant sums involved. She noted, “If ₹50,000-60,000 crore a year is lost in F&O, money that could have been used for productive purposes like upcoming IPOs or mutual funds, why isn’t this seen as a macroeconomic problem?”
Impact of F&O Trading Losses on Indian Households
A SEBI study previously revealed that 90% of F&O trades result in losses. In response, SEBI has released a consultation paper proposing measures to curb such activities.
Regarding the potential impact of these regulatory changes on trading fees, NSE Chief Executive and Managing Director Ashish Kumar Chauhan stated that the exchange will comply with the new regulations. Buch acknowledged that while there may be short-term financial trade-offs for exchanges, the long-term benefits will outweigh them.
She emphasized that exchange-traded funds (ETFs) cannot substitute for the riskier derivatives trading due to differing liquidity and leverage dynamics.
On the issue of KYC (Know Your Customer) validation for mutual fund investments, Buch clarified that the same KYC process used for bank customers cannot be applied, citing concerns similar to those experienced with Paytm. “We will not allow a Paytm-type issue in our market. The absence of a KRA system in banking meant the problem was confined to Paytm. Allowing such issues to affect our system would be detrimental,” she explained.
Buch also addressed concerns about fininfluencers, noting difficulties in their registration as investment advisors and indicating that SEBI plans to address these issues soon. She criticized false claims made by such platforms and hinted at new performance validation mechanisms being developed by NSE Group.
Additionally, SEBI plans to propose making ASBA (Application Supported by Blocked Amount) mandatory, starting with qualified brokers. Buch pointed out a market misconception about brokers not receiving fees for transactions, noting that brokers’ earnings of ₹2,800 crore from trades will now be reclassified as broker fees instead of exchange fees.
Buch expressed frustration with the mutual fund industry for not proposing easier ways for the diaspora to invest. She also called for broader, principle-based regulations on artificial intelligence and hinted that SEBI will be exploring this area.
In response to questions about crypto exchanges, Buch firmly stated that stock exchanges and crypto exchanges should not be equated. She criticized the notion that $250 million disappearing from exchanges could be deemed an “Act of God,” referencing ongoing issues with WazirX.
In her previous remarks regarding “froth” in various market segments, particularly smallcaps, SEBI Chairperson Madhabi Puri Buch suggested that future regulatory interventions might be unnecessary if the industry self-regulates effectively.
Buch also highlighted that nearly ₹80,000 crore worth of IPOs are currently awaiting approval, while ₹40,000 crore worth of IPOs have already been approved and are in the pipeline.
Regarding new asset class proposals for mutual funds, Buch noted the presence of illegal portfolio management services (PMS) and stated that SEBI’s proposals aim to address market demand for such categories.
Addressing questions about the global tech outage on Friday, the regulator assured that market participants have developed robust backup systems to mitigate such risks. Investor protection mechanisms are activated only if specific timelines or thresholds are breached.
Additionally, Buch mentioned that Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) have the potential to grow to a size comparable to India’s current GDP. She also advocated for the sachetisation of financial products, suggesting smaller-ticket systematic investment plans (SIPs) to enhance accessibility.
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