SEBI Panel Proposes Rs 1,500-Crore Cap On Intraday Index Derivative Bets
The Securities and Exchange Board of India’s secondary market panel is likely to propose a Rs 1,500-crore cap on large intraday index derivate trades, persons privy to the development told NDTV Profit on Friday. This move follows SEBI’s scrutiny of high-frequency trading firm Jane Street, and it’s expected to have a significant impact on the Indian stock market.
Understanding Intraday Index Derivative Bets
Intraday index derivative bets refer to trades that are executed within a single trading day. These bets can be highly speculative and are often used by high-frequency trading firms to capitalize on small price movements in the market. At present, there is no limit on intraday index derivate bets, which has raised concerns about market volatility and the potential for manipulation.
Why Is SEBI Proposing A Cap On Intraday Index Derivative Bets?
SEBI is proposing a cap on intraday index derivative bets to reduce market volatility and prevent manipulation. The regulator believes that a cap will help to prevent large traders from taking excessive positions in the market, which can lead to sudden and unexpected price movements. Additionally, the cap is expected to reduce the risk of default by traders, which can have a ripple effect on the entire market.
What Does This Mean For Indian Investors?
The proposed cap on intraday index derivative bets is likely to have a mixed impact on Indian investors. On the one hand, it may reduce market volatility and make it easier for investors to make informed decisions. On the other hand, it may also reduce liquidity in the market, which can make it more difficult for investors to buy and sell securities.
Other Proposals Under Consideration
In addition to the proposed cap on intraday index derivative bets, SEBI is also considering several other proposals to improve the functioning of the Indian stock market. These include appointing two independent executive directors as heads of separate business verticals, clear roles for executive directors and other key officials, and a review of the Special Pre-Open Session (SPOS) mechanism for IPOs and relisted shares.
Governance Reforms For Exchanges And Depositories
SEBI is also considering governance reforms for exchanges and depositories, including the appointment of independent executive directors and clear roles for executive directors and other key officials. These reforms are expected to improve the transparency and accountability of exchanges and depositories, which will help to boost investor confidence in the market.
Allowing Interest Earned On Investor Protection Fund (IPF) Investments
SEBI is also considering a proposal to allow interest earned on Investor Protection Fund (IPF) investments to be used for compensating dedicated IPF staff. This move is expected to improve the functioning of the IPF, which is responsible for protecting the interests of investors in the event of a default by a trading member or a clearing member.
Merging Investor Protection Funds Of Stock Exchanges And Commodity Derivatives Exchanges
SEBI is also considering a proposal to merge the Investor Protection Funds of stock exchanges and commodity derivatives exchanges into a single consolidated pool. This move is expected to simplify the process of protecting investor interests and reduce the administrative burden on exchanges.
Systemic Withdrawal And Transfer Facility For Mutual Fund Investors
SEBI is also considering a proposal to introduce a systemic withdrawal and transfer facility for mutual fund investors holding units in demat form. This facility is expected to simplify the process of withdrawing and transferring mutual fund units, which will make it easier for investors to manage their portfolios.
Review Of Performance-Linked Pay Of Top Officials At MIIs
SEBI is also reviewing the framework for performance-linked pay of top officials at MIIs such as exchanges, clearing corporations, and depositories. The regulator is considering linking variable pay to accountability and governance standards, which is expected to improve the transparency and accountability of MIIs.
Conclusion
The proposed cap on intraday index derivative bets is a significant development for the Indian stock market. While it may reduce market volatility and prevent manipulation, it may also reduce liquidity in the market. Indian investors need to be aware of the potential impact of this proposal and stay informed about the latest developments in the market. By doing so, they can make informed decisions and navigate the market with confidence.
