Financial market regulators, the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI), are increasingly concerned that the surging volumes in futures and options (F&O) trading are impacting capital formation and posing systemic risks to India’s economic growth. Initially worried about retail investors losing money in the F&O segment, regulators now see household savings being diverted into F&O trading, potentially harming investment and growth.
Data from SEBI shows a sharp rise in F&O trading, with turnover at BSE and NSE increasing from Rs 2,189 lakh crore in May 2022 to Rs 9,504 lakh crore in May 2024, and the number of contracts surging from 262 crore to 1,373 crore. While retail investors often incur losses, proprietary and high-frequency traders typically profit. SEBI, viewing much of this trading as speculative, has formed a working group led by former RBI executive director G Padmanabhan to propose risk management measures, including increasing the minimum value of F&O contracts and raising margin requirements.
These steps aim to curb speculative trading and protect investors, with SEBI emphasizing the need for regulatory intervention to ensure the stability and health of India’s financial markets amid rapid F&O growth.
