IC Markets

ANMI Looking Forward to SEBI Worries of Derivatives Trading Growth

anmiA report has been submitted by the derivatives brokers in India to SEBI stating that high volume in the derivatives sector is primarily because of NSE or National Stock Exchange overstating volumes. A Pan-India body trading members called Association of National Exchanges Members of India (ANMI) responded to a public consultation call out sent by SEBI related to new rules formulation for derivatives trading.

SEBI is looking forward to introducing a new set of regulations keeping in view that risky investment products might lead to losses to lay investors as volumes increase. It is also considering plugging any arbitrage opportunities or inefficiencies which is present at the moment in the derivatives market.

SEBI in the discussion paper noted that NSE data showed a steep rise in more than ten times in derivatives turnover as compared to the cash market. It further pointed out that trade ratio made in equity derivatives with that of equity cash market was up by approximately 15 times. SEBI argued how far such volumes were comparable to global standards.

SEBI further highlighted the availability of some active individual investors in the derivatives market and expressed its worries about the overall ability for risk handling that arises from the sophisticated instruments. In its response, ANMI said that National Stock Exchange was submitting options data by using “notional” turnover instead of premium turnover that leads to overstating the total business done in future and options segment.

It said that overall turnover in equity derivatives segment was 15.59 times as compared to cash segment, but when the ratio was taken using premium segment, then it was 2.53 times of the value which is within the global norms. The body further noted that a lot of OTC contracts that occur in derivatives market on a worldwide level were being executed outside exchange platform that means they would be excluded from exchange volume data.

During the fiscal year 2016-17, the equity cash market turnover in India was somewhere around 60.5 lakh crore but the equity derivatives turnover for the same period was a whopping 944 lakh crore. The cash market has been maintaining growth at an ACGR of 11 percent since the fiscal year 2004-2005 whereas the equity derivatives market recorded a growth rate of more than 35 percent.

ANMI commented that average Indian trader and investor was more tech savvy and knowledgeable as compared to investors from other countries. It said that derivatives trade in India is not risky and offers low to medium risk investment avenue that offers similar returns as compared to debt instruments to investors.

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ANMI Looking Forward to SEBI Worries of Derivatives Trading Growth
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ANMI Looking Forward to SEBI Worries of Derivatives Trading Growth
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A report has been submitted by the derivatives brokers in India to SEBI stating that high volume in the derivatives sector is primarily because of NSE.
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Top10FX.net
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Steven Rudford

Steven Rudford

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