Sebi looking at new form of risk disclosure for F&O amid rising retail interest

“India is not a nanny state….if somebody wants to trade in the F&O segment we don’t think we should stop them,” said Madhabi Puri Buch, Sebi chairperson, at her first ever public appearance as head of the regulatory body.

“There is information which Sebi is looking at and evaluating as to what form and manner that (disclosure) needs to be disclosed to the public,” Buch said. “We are evaluating in what form and manner that disclosure should be made,” she added while responding to a query on whether Sebi was concerned by the growing retail participation in the segment. 

Illustrating Sebi’s regulatory framework as a disclosure based regime, she said the regulator had no view in IPO pricing . However, if a company tapping the IPO market had placed its equity with a private party at ₹100 a share and wished to raise capital from the public at ₹450 , it should disclose what accounts for the difference between the issue price and placement price .

Sebi in its approach would be led by first principles and data and not be dogmatic.

“Every policy is contingent on data support . Our commitment to industry is that we will eschew dogma and embrace data . “

She added that any suggestion from industry should be backed by data and be specific rather than generic .

Buch was addressing industry executives during a Ficci event .

Speaking on condition of anonymity, a top MF CEO said , housewives were citing their participation in selling options with “much elan” during an investor drive run by his fund house .

“In buying options you can lose 100% capital but in selling options, your risk becomes unlimited,” he said . “Yet, retail investors without an idea of the instrument are trading on it saying we are earning a lot by receiving premiums (from buyers).”

He added that the lure of receiving premium from buyers for selling them options were making them “impervious” to the risk .

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