Sebi considering margin rationalisation for longer-tenure derivatives: Tuhin Kanta Pandey

Reports coming in for today mention that 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 stated 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 stated 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 stated 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 stated addressing the Conclave.

"Optimum regulation can reduce unnecessary friction. Our objective is as a result to make markets easier to access, while preserving the trust on which those markets are built," he stated.

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

The Sebi chief stated India's financial markets have grown substantially, but the next phase should not be measured only by their size.

"We additionally need to ask: Are our markets becoming deeper and more liquid? Are we creating adequate pools of long-term capital?" he stated, while emphasising the need for informed participation as new market participants 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 stated.

The Sebi chairman additionally stated 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.

He stated Indian financial markets need to become "deeper, more diverse, efficient, resilient and trusted" as the economy enters its next phase of expansion.