SEBI Calls for Balanced Growth in India's Derivatives Market

SEBI expresses concern over the dominance of ultra-short-term derivatives trading in India's capital markets, urging measures to extend product tenure. Despite regulatory steps showing moderation, SEBI stresses continuous engagement to protect market health and facilitate capital formation. Industry collaboration is deemed crucial for sustainable growth and investor trust.

On Thursday, SEBI voiced concerns regarding the escalating influence of ultra-short-term derivatives trading in India's capital markets. The regulatory body warned that such trends could potentially jeopardize market health, advocating for the extension of tenure and maturity for these financial products.

SEBI Whole-Time Member Ananth Narayan, speaking at the CII's 11th Capital Markets Conclave, stated that the predominance of short-term derivatives, particularly expiry-day index options, signifies an unhealthy market imbalance. Narayan cited SEBI's research indicating that 91% of individual futures and options traders suffered net losses in FY25, losing over Rs 1 lakh crore.

Despite implementing regulatory measures in late 2024 and early 2025, SEBI stressed the necessity for ongoing stakeholder dialogue to enrich the cash equities market and enhance derivative product quality. SEBI's aim is to safeguard capital formation and maintain market health, urging for transparency, trust, and balanced regulation.

(With inputs from agencies.)