SEBI considering margin rationalisation for longer-tenure derivatives: Chairman

Markets regulator SEBI is considering rationalising margin requirements for longer-tenure derivative products to encourage healthier, long-term participation in the futures and options (F&O) segment, chairman Tuhin Kanta Pandey said on Wednesday.

“SEBI is open to reviewing and potentially lowering margin requirements for longer-tenure derivative products to encourage healthier, long-term participation in the Futures & Options (F&O) market,” Pandey said on the sidelines of the 13th SBI Banking & Economics Conclave here.

Further, Pandey indicated that the regulator is examining structural measures, including possible adjustments in margins for longer-tenure contracts.

He said the regulator’s approach is aimed at ensuring that markets become easier to access while preserving investor protection and trust.

“Ease of doing business and investor protection are not competing objectives,” Pandey later said, addressing the Conclave.

“Optimum regulation can reduce unnecessary friction. Our objective is therefore to make markets easier to access, while preserving the trust on which those markets are built,” he said.

The comments come at a time when regulators have been focusing on the risks faced by retail investors in the equity derivatives segment, where high-frequency trading and leveraged positions can result in substantial losses.

The SEBI chief said India’s financial markets have grown substantially, but the next phase should not be measured only by their size.

“We also need to ask: Are our markets becoming deeper and more liquid? Are we creating adequate pools of long-term capital?” he said, while emphasising the need for informed participation as new investors enter markets and new products become available to them.

“The broader principle is straightforward. Ease of doing business and investor protection are not competing objectives,” Pandey said.

The SEBI chairman also said that India’s growing economy requires different kinds of capital, available for different purposes and periods, and that banks and capital markets should be viewed as complementary parts of the same financing ecosystem.