No issue with futures segment, but concerns around short-dated options: SEBI chief

SEBI chairman TuhinKanta Pandey said the regulator has no concerns over the futures segment of the derivatives market, but remains watchful of speculative activity in short-dated options.Pandey said the regulator’s recent interventions are focused specifically on curbing excesses in short-tenor options, while preserving the crucial role of futures and derivatives in price discovery and liquidity.

Responding to a question on the derivatives segment, Pandey said the issue should not be broadly labelled as one concerning F&O.“You should not be calling it F&O because futures we never had an issue with. There was an issue around short-dated options,” he said in an interaction with PTI. He noted that SEBI has already introduced a series of regulatory measures targeting excesses in short-tenor options. Measures were rolled out in October 2024 and May 2025, with phased implementation in July, October and December.

The regulator is now assessing the impact of these interventions based on market data. “We are looking at what impact it has based on data. If we think there is still a need for intervention, we will look at different pathways to achieve that goal and have another round of consultations,” he said.

Pandey emphasised that SEBI does not intend to “flip-flop” on the issue or take broad-brush actions. Instead, the regulator aims to identify specific problem areas and address them in a calibrated manner.

Short-dated options, especially zero-day-to-expiry contracts, are derivatives that expire either the same day or within a few days. They are cheap and offer high leverage, which allows traders to bet on or hedge against very short-term market movements. However, these instruments are extremely volatile and lose value very quickly, making them highly risky for retail investors.

SEBI chief highlighted that the futures market and the broader derivatives segment play a crucial role in price discovery and liquidity. “It is better we concentrate on the problem areas which Sebi itself identified and also put out the data. We issued statutory warnings, introduced measures, and will continue to analyse their impact. This is the path we will follow,” he added.

Earlier in July, SEBI also expressed concern over the growing dominance of ultra-short-term derivatives trading, cautioning that such trends could undermine the health of India’s capital markets.Responding to suggestions that people from the lower-income strata should be kept out of derivatives trading, the SEBI chief said the regulator receives numerous recommendations from various quarters. “Everybody can make suggestions. We receive plenty of suggestions through emails and social media, one way or

the other,” he said, without indicating any immediate move on the proposal.Last week, NSE’s managing director and CEO, Ashish Kumar Chauhan, made a case for ‘minimum qualifying criteria’ for those participating in derivatives trading to prevent people from lower strata of society from wasting their money on speculation.

According to SEBI’S findings, over 90 per cent of traders lose money in derivatives trading.Regarding NSE’s much-awaitedInitial Public Offering (IPO), SEBI chief said that the no-objection certificate (NOC) was held up for a long time. So, this means the bourse has the go-ahead to start preparations now. He clarified that the clearance is only an initial step and the IPO remains some time away.

“There are a lot of preparations to do. The DRHP process has not yet begun. This is an initial NOC because it is a market infrastructure institution. They have got the go-ahead to prepare, and thereafter, there will be the DRHP process, public comments, and then the RHP. So, it will take time,” he said.In January, SEBI granted the NOC, paving the way for the bourse to move ahead with its listing plans after almost a decade of delays.

On Pre-IPO mechanism, Pandey noted that while several electronic platforms currently facilitate trading in unlisted shares, SEBI’S regulatory ambit primarily covers listed securities and matters relating to listing. Therefore, any proposed framework would have to operate within that statutory boundary.

He clarified that the regulator is not considering an open-ended trading platform. Instead, if introduced, the mechanism would function for a defined and limited period before listing, with enhanced transparency and information flow to ensure orderly price discovery.He added that the proposal is still at a conceptual stage. Once SEBI reaches a firm view, it will undertake public consultations before finalising the framework.

On valuation concerns, the top boss at SEBI said that IPO pricing ultimately depends on market assessment. “No one knows the valuation with certainty. Valuations have to be discovered in the market,” he said, adding that SEBI’S role is to strengthen disclosures rather than determine prices.

Addressing concerns about whether the broader investment flexibility could dilute the pure equity mandate of schemes, Pandey clarified that the provision is optional and not mandatory.

“It does not mandate, it does not dilute. This is only optional. Like you may have schemes which allow you to do that,” he added.He emphasised that the key safeguard lies in labelling and transparency, and clear scheme categorisation will prevent mis-selling or mis-reporting and ensure investors are not misled.

Last week, SEBI came out with new categorisation norms allowing active mutual fund schemes to invest up to 35 per cent of their residual assets in gold, silver and REITs/InvITs. Further, SEBI defined limits on portfolio overlaps in thematic funds to maintain distinct investment objectives.