As it gears up for an overhaul of equity derivative rules, market regulator Sebi on Thursday sought views from stakeholders on whether there is a need to make physical settlement mandatory for stock derivatives.
In a consultation paper, Sebi also asked market participants to submit their views on whether physical settlement should be done in a phased manner starting with stock options followed by stock futures. The comments have been sought till September 25 and follows an earlier detailed consultation paper on an overhaul of the rules governing equity derivatives in India through which the regulator is looking to detoxify the ‘high-turnover, high-risk derivatives trading’.
There have been concerns over suitability of these 'complex and risky' products for individual investors. Sebi had initiated a public consultation in July for framing the new rules, while noting that the trading turnover in these products has seen a sharp surge of over ten-fold over the past decade and the ratio of trades in equity derivatives to that of equity cash market has risen to over 15-times.