SEBI flags concerns on F&O bets on borrowed money

Sebi chairperson Madhabi Puri Buch on Thursday said the capital markets regulator has anecdotal evidence of people borrowing money to place speculative bets in the derivatives segment and rued that household savings are going into such risky bets. Making it clear that it is "not a good thing", Buch said people are borrowing money and even mortgaging their parents' homes for raising funds to punt in the derivatives segment. Reminding about Sebi research pointing out retail investors losing money in nine of ten trades, Buch said big money is being lost in such aspects, and also underlined broader macroeconomic concerns.
Buch elaborated that most of the trades are speculative because they are done on expiry date or in the last hour of trade, and have no hedging, which make it clear about the nature of the operation being speculative. She said that apart from investor protection, another dimension of the concerns on the F&O market involves systemic risks in the capital markets ecosystem but was quick to add that we are reasonable well protected on this front.
To take care of all these concerns, the capital markets regulator has formed an expert group to study the futures and options market activity, Buch said, adding that it will go into all the aspects of the market and submit its  recommendations to the secondary market advisory committee.After this, there will be a public consultation on the same, she assured. Buch said there is a need to look into the derivatives activity because of the very high numbers, and pointed out the huge jumps in the last six years.
The overall turnover was Rs 210 lakh crore in FY18, jumped to Rs 500 lakh crore in FY24, she said, adding that individual investors inindex options jumped to 41% in FY24 from 2% in FY18. The SEBI board also approved proposals on ease of doing business across various aspects, and Buch said the market should expect more such moves going forward.