F&O Frenzy: Will Sebi's New Rules Curb Speculation?

For the past few years, the Indian financial market has been grappling with a concern that has caught the attention of the market regulator.
Steady rise in speculative trading through "Futures & Options" or F&O contracts.
These instruments allow investors to bet on future stock prices without actually buying or selling the shares.
The regulator SEBI fears this speculation distorts the true value of a company and exposes investors to potential losses.
And the evidence for it is alarming- data from SEBI reveals that a staggering 90% of retail traders face losses in the derivatives market.
To curb this unabated rise in speculative trading, Sebi recently introduced a new set of rules. Rules that would raise the bar for stocks to be included in the F&O segment.
The fresh regulation aims to raise multiple limits for stocks that are traded in the Futures & Options market. Our detailed explanation is in the video linked in the description.
The bottomline is -- Sebi wants only well-established and actively traded stocks to be available for derivatives trading.
But can these new rules actually prevent people from what SEBI considers gambling away their savings in this high-stakes arena?
With the new rules, Sebi wants to weed out speculation in thinly-traded and lesser-known stocks. Such stocks are more vulnerable to manipulation because they have lower liquidity and less market scrutiny.
((QUOTE AAMAR))
With fewer shares being traded, it takes less effort and capital to influence their prices. Manipulators can easily drive up or down the price of these stocks, creating artificial volatility. This makes it easier for unscrupulous traders to profit at the expense of unsuspecting investors. ((OUT))
Additionally, lesser-known stocks often lack the extensive analysis and coverage that more established stocks receive, making it harder for investors to access accurate information and assess the true value of these companies. As a result, these stocks become prime targets for speculative activities and market manipulation.
By focusing on well-established and actively traded stocks, the market is likely to experience reduced volatility and increased transparency.
This helps in building investor confidence and promoting a healthier, more stable financial market. The new regulation aims to protect investors from the risks associated with speculative trading and ensure that the derivatives market serves its intended purpose of risk management and price discovery.
But are the new measures enough to curb or potentially end speculation?
Limiting Futures & Options trading to well-established and actively traded stocks is a big step in reducing speculation, but it may not be enough by itself.
To strengthen market integrity, we need better tools to monitor and stop manipulation across all stocks, not just those in F&O.
Educating investors about the risks of speculative trading is crucial for helping them make smarter decisions. We also need strict penalties for market misconduct and more transparent company disclosures to build trust.
Improving liquidity in lesser-known stocks and working with global regulators for best practices can further fortify the regulatory framework. By combining these strategies with the new F&O rules, Sebi can better control speculative risks and create a safer financial market for everyone.
..............................................................................................
News9 is India's first fully integrated English news brand across all digital platforms. It includes a publishing platform, viz. www.news9live.com, a future-ready OTT platform, News9 Plus, and a 24-Hour video streaming service on connected TVs and all social platforms.
It's the English news brand that understands and fits perfectly into the digital-first lifestyles of our English news audiences.
► News9 Plus App : onelink.to/8pwfkc
► News9 OTT Coupons : bit.ly/4dwLDx4
► Watch us on RUclips : / news9live
► Like us on Facebook : / news9live
► Follow us on Instagram : / news9live
► Follow us on Twitter : / news9tweets

[@ASHOK66able]

Ban honi chaye