The official told FE that currently, Sebi was inspecting the surveillance and monitoring mechanism of The Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) and it was expected to be completed by month-end. If required, we may ask the bourses to exercise greater caution for some stocks in the derivatives segment, he said. If we find any anomaly in some of the stocks in Sebis inspection report, we may ask these bourses not to allow derivatives trading in them as well, he added.
The Sebi official said the inspection exercise has been undertaken to ensure the safety of the derivatives segment for trading in additional stocks slated to commence from January 31.
The official also said it was not that once the list for derivatives is cleared, it cannot be changed. In fact, in its circular to SEs, Sebi has clearly mentioned that the final approval for commencing derivatives trading in these approved stocks will be on the satisfaction of the regulator.
Earlier this month, the market regulator cleared some 31 additional stocks for derivatives trading submitted by BSE and NSE. However, within 24 hours of clearing the list, Sebi changed its stance and asked SEs to drop six stocks, saying since the Sebi probe in these stocks was still on and as these stocks were indicted by the Joint Parliamentary Committee (JPC) in its report on the stock-market scam, the SEs should not proceed with derivatives trading in them.
Out of the six stocks which were dropped from the list by Sebi, five common stocks for BSE and NSE were: Aftek Infosys, Global Tele, HFCL, SSI and Zee Tele. One stock Silverline Technologies was exclusively cleared for NSE.
The sudden reversal of Sebis decision created a controversy in the market, with intermediaries expressing the opinion that the regulator should have done its due diligence before taking such a major decision.
The Sebi board has already agreed in principle to allow physical settlement in derivatives, the official said, but added that unless a proper stock- lending and borrowing mechanism and margin trading were put in place, cash-settled derivatives cannot be settled physically.
On allowing cross-margining between the cash and derivatives segment, the Sebi official said, SEs have told us that they have to sort out some software-related issues. Once this is through, the scheme will be implemented as soon as possible.