The markets regulator, Securities and Exchange Board of India (SEBI), is in talks with the Finance Ministry to curb options market speculation. It is likely that SEBI may discontinue weekly options expiry and instead bring a bi-monthly or monthly expiry, according to CNBC-TV18.
The regulator wants retailers to move out of speculating on income and instead take more informed decisions. It wants the government to nudge people towards investing rather than punting. To do so, SEBI may ask the Finance Ministry to reduce Securities Transaction Tax on cash market transactions.
The markets watchdog may consider reducing the cash market margin requirement and also bring out a consultation paper on discouraging options speculation.
FinMin talks comes in backdrop of Jane Street scandal
The reports of SEBI in talks with Finance Ministry came amid the backdrop of ongoing investigation in Jane Street’s market manipulation matter.
SEBI accused Jane Street Group of artificially prop up prices of stocks and futures to profit from massive options speculation. However, the global high frequency traders said that there’s unclear line between illegitimate trading and routine activity like market making and arbitrage.
Steps taken by SEBI to curb volatility to save retail investors
In September 2024, SEBI asked the National Stock Exchange (NSE) to change its weekly expiry of F&O contracts to Tuesdays from Thursday slot. By moving the expiry cycle to Tuesday, teh regulator with the help of the bourses intends to play down elevated market volatility often observed on expiry days, especially Thursdays. This usually use to coincide with macroeconomic events, policy announcements, or global data releases.