The Securities and Exchange Board of India (SEBI) is holding an important board meeting today, September 30, with potential game-changing reforms on the table. Market participants, especially traders, brokers, and foreign investors, are keenly watching for the outcomes of this meeting, as the decisions are expected to bring significant changes to the securities market.
Big Changes in Derivatives Framework on the Horizon
One of the primary areas of focus will be the index derivatives framework. SEBI is expected to take a major decision to curb speculative trading and streamline the expiry of derivatives contracts. This is being viewed as a move to prevent the “gambling-like” behavior associated with daily expiries of index derivative contracts.
In July, SEBI had proposed a new framework that recommended limiting the expiry of index-based derivative contracts to weekly expiries. Additionally, it suggested setting a minimum contract size between ₹20-30 lakh, which is aimed at discouraging retail investors from engaging in risky derivative trades. The market is now eagerly waiting for these proposals to be formalized after today’s meeting.
Tighter Rules on F&O Trading
SEBI’s focus on Futures & Options (F&O) trading rules comes after Finance Minister Nirmala Sitharaman and SEBI Chairperson Madhabi Buch both emphasized the need for reforms. The regulator is considering adjustments to the rules surrounding F&O expiry, which would directly impact traders who participate in the options and futures markets.
Potential Boost for Foreign Portfolio Investors (FPIs)
Another key aspect of today’s meeting is related to easing compliance for Foreign Portfolio Investors (FPIs). SEBI had introduced additional disclosure norms in August 2023, which have raised concerns among FPIs. These norms included requirements for segregated portfolios of offshore derivative instruments (ODIs) and more detailed reporting from FPIs.
It is expected that SEBI will make it easier for FPIs to comply with these regulations, making foreign investment in India smoother and more attractive. Any changes decided in today’s meeting could positively influence market sentiment for foreign investors.
Performance Validation Agency in the Spotlight
One of the much-anticipated reforms is the establishment of a Performance Validation Agency. This agency is designed to verify the performance claims of intermediaries such as Research Analysts (RAs), Investment Advisors (IAs), and algo traders. Though it has been in discussion for over a year, the market is hoping for a formal launch soon. However, technical challenges have delayed its implementation.
Today’s meeting could see progress on this front, as SEBI had previously hinted at its launch during a recent industry event.
