Sebi chief terms losing F&O trades as macro issue

Mumbai: Sebi chairperson Madhabi Puri Buch on Tuesday said households are losing up to Rs60,000 crore a year in the problematic futures and options (F&O) segment. Speaking at an event at the largest equity bourse NSE, Buch wondered why such bets in the derivatives markets should not be called as a ‘macro issue’, as it had done earlier.

“If Rs50,000-60,000 crore a year is going away into losses in F&O whereas that would have been productively deployed as may be the next IPO round, maybe MF, to other productive purposes, why is that not a macro issue?” Buch said.

Buch also pitched for the need to have broader, principle-based regulations on artificial intelligence (AI) and hinted that the regulator will look at it. Replying to a question, Buch also said that it is wrong to equate stock exchanges with crypto exchanges, and gave a stern statement on the same drawing from the ongoing Wazirx challenges. “$250 million cannot vanish (in the exchanges) and be called as an Act of God,” she said.

A Sebi study had earlier pointed to 90 per cent of the trades resulting in losses. The capital markets regulator also came up with a consultation paper on Tuesday proposing ways to limit the activity. Responding to a question on the impact of such attempts to curb the fee-yielding trades, NSE’s chief executive and managing director Ashish Kumar Chauhan said it will abide by the regulations. Buch said while there is a short-term trade-off for exchanges by way of fees impact, in the long term it will be beneficial to all the stakeholders.

She also said that exchange-traded funds can’t be an alternative or a replacement for the riskier derivatives activity for investors as the dynamics of liquidity and leverage are very different. Meanwhile, to a question on whether a bank customer can use the same KYC (know your customer) validation for investing in mutual funds, Buch replied in the negative and referred to the banking system’s troubles with Paytm.

“'We will not allow for a Paytm-type contamination in our market. We all saw what happened in Paytm. Because in the banking system, there is no KRA type system, the problem of Paytm stays in Paytm. It does not spread to other banks. But if we allow Paytm to come into our system, and no KRA, then it contaminates the whole system,” she said.

“We will always have our KRA sitting in the middle to see that things are validated. Otherwise, you will have any mischievous player coming and contaminating the whole system,” she added. On fininfluencers, Buch said Sebi has identified difficulties in getting registered as an investment advisor being a detrimental factor and will soon be rationalising it. She said that there are false claims being peddled by such platforms, and added that an entity from the NSE Group has showcased a performance validation mechanism and hinted that it will soon be implemented.