India’s markets regulator is expected to introduce stricter rules for stocks eligible for derivatives trading and to instruct brokers and mutual funds to cease using unregistered financial influencers in their marketing efforts. These measures aim to curb market manipulation amid the rapid growth of complex financial instrument trading. The Securities and Exchange Board of India (SEBI) will likely discuss these steps at its board meeting on Thursday, according to reports of moneycontrol.
Earlier this month, SEBI released a discussion paper suggesting that stock derivatives should maintain sufficient liquidity and trading interest, intending to eliminate derivatives linked to illiquid stocks. In 2023-24, the notional value of options traded in India surged, more than doubling to $907.09 trillion from the previous year. Most options trading in India involves index option contracts, which SEBI is considering regulating through technical adjustments, as reported by Reuters earlier this month.
The COVID-19 pandemic saw a significant increase in retail investor participation in equity markets, leading to a rise in financial influencers providing advice on social media. To prevent investors from being misled, SEBI has proposed that brokers and mutual funds dissociate from unregistered influencers. Additionally, the regulator has convened a group of exchanges, brokers, and mutual funds to recommend further measures to mitigate manipulation risks and protect retail investors in options contracts.
On Thursday, SEBI’s board will also consider revising delisting rules to facilitate easier exit for companies from stock exchanges.
