• UGI USER
  • Aug 01, 2024
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SEBI’S PROPOSALS TO CURB SPECULATION

Why in the news?

Sebi’s new proposals aim to curb excessive retail speculation in derivatives, ensuring market stability and protecting retail investors.

source:lotusarise

Key Objective and Measures:

  • Objective: Reduce excessive retail speculation in derivatives.

Measures:

  • Maintain depth in F&O for effective hedging.
  • Prevent speculation from shifting to smallcaps.

Impact:

  • Adapting trading revenue models and business strategies.
  • Introducing conservative investment options (portfolio management services, AIFs) to manage risks and protect household savings.
About Securities and Exchange Board of India(SEBI):

Origin:

  • Before SEBI: Regulated by Controller of Capital Issues under Capital Issues (Control) Act, 1947.
  • SEBI established in 1988, statutory powers in 1992 with SEBI Act.

Structure:

  • Chairman (Union Government nominee).
  • Two members from the Union Finance Ministry.
  • One member from RBI.
  • Five additional members (at least three whole-time).

Powers:

  • Quasi-legislative: Formulates rules on obligations and insider trading.
  • Quasi-executive: Examines accounts, gathers evidence.
  • Quasi-judicial: Passes judgments on market malpractices.
  • Approval: Approves by-laws of securities exchanges.

Functions:

  • Protect investors and market development.
  • Inspect accounts, mandate listings.
  • Register brokers, control malpractice.
  • Educate investors, provide a platform for market participants.

About Future and options( F&O):

  • Futures: Contracts requiring the buyer to purchase or the seller to sell an asset at a fixed future date and price.
  • Options: Contracts granting the holder the right, but not the obligation, to buy or sell an asset at a set price within a specified period.