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.
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