SEBI keen on making derivatives popular for retail

MUMBAI: The Securities and Exchange Board of India, (SEBI) which regulates the country’s markets, is keen on making derivatives popular as a hedging instrument for retail investors, a senior official said on Thursday.

“Internationally, I don’t think this product has actually caught the fancy of the retail market at all. We don’t want to close the doors to that... the derivatives market,” SEBI’s executive director Sandeep Parekh, told a conference.

“We don’t want to close the doors to the fact that maybe, this market as well becomes a market in which there will be significant retail participation.”

Parekh said the markets regulator is also in the process of introducing a long-term options contract in equities. “We have received letters from BSE (Bombay Stock Exchange) and NSE (National Stock Exchange) for clearing the product,” he said. “You will be seeing these products in a few months.”

At present, options contracts in equity have a maximum maturity of three months, and SEBI has allowed index options with a tenure of up to three years. Currency-linked futures and options, to help investors hedge foreign exchange risks, are not likely to be launched in the near-term, and their introduction would depend upon steps taken towards capital account convertibility, Parekh said.

“What is not going to happen is the recommendation on currency traded F&O,” he said. “But, we expect to see developments after some time.”

Parekh said SEBI was in talks with the finance ministry on preparing tax rules for securitised debt. “Given that we are looking at cash flows, which may be current... which may be future cash flows,” he said.

“There will be tax consequences, for which we are in talks with the ministry. We are trying to iron out specific tax issues, which might arise out of this,” Parekh said.