SEBI Chair Madhabi Puri Buch Voices Concern About Increasing Popularity Of F&O Trading

Buch said that the authorities are now concerned about the surge in trading in F&O segment and the risk caused by it for the investors, along with the hazard it poses to disrupting the economic growth

The SEBI chief explained that this will end impacting household savings negatively as they will be utilised for speculative purposes rather than building capital and wealth.

Source : PTI

Madhabi Puri Buch, Chairperson, the Securities and Exchange Board of India (SEBI) cautioned the public against the rising trading volume in the futures and options (F&O) segment. The chief of the regulatory body said that the trading volume in the F&O segment has now become a macro-level concern.

Speaking at an event organised by SBI Mutual Fund on Friday, Buch said that worries now remain not only about the ‘micro-level’ consequences of the surging trades, but also the ‘macro-level’ impact of the rising volume in the segment, reported Moneycontrol.

The capital market regulator’s head said that the authorities are now concerned about the popularity of trading in F&O segment and the resulting risk caused by it for the investors, along with the hazard it poses to disrupting the economic growth.

Buch noted that the F&O segment has witnessed a major surge in trading volumes and the resulting losses could not have been predicted. “If you see the way the (F&O trading) volumes have grown over the last few years, I don't think anyone would have anticipated. If you see the number of young people who have entered that entire process (of taking F&O trades), who have lost tonnes of money, no one would have expected that,” she said.

Sharing worries about the micro-level impact of this growth in F&O trading, the chairperson said that the issue has now transformed into a macro-level worry. She questioned if this is what the domestic market is designed to do by helping speculative trading flourish. Further, she explained that the markets regulator remains worried that this popularity of the segment will end impacting household savings negatively as they will be utilised for speculative purposes rather than building capital and wealth.

Buch noted that now SEBI will have to act on these concerns based on the data available. “There is a systemic risk in the capital market ecosystem itself. Are we running a risk of a black-swan event? We think we are reasonably well protected. But there is always room for improvement,” she pointed out.