Sebi's new effect on Equity Market
Regulator SEBI today decided to rationalise and strengthen the framework for equity derivatives market by facilitating greater alignment of the cash as well as futures and options segments. Besides, physical settlement for all stock derivatives would be carried out in a phased and calibrated manner, according to a release issued by SEBI after its board meeting.
Sebi announced steps to make algorithm trading more accessible and reduced the cost of buying equity mutual funds. It also proposed to introduce a new compliance framework for stocks undergoing insolvency proceedings and an “entirely new” set of buy-back regulations.
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| Capitalstars financial research pvt. ltd. |
“Out of 80 odd recommendations (of the Kotak panel), 40 were accepted without modification, 15 with modifications, eight were referred to government and other departments,” Sebi chairman Ajay Tyagi told reporters after the board meeting on Wednesday.
“Sebi in its wisdom has taken a decision taking into account feedback and interests of all stakeholders. We must bring Indian governance standards not only on par with the best in the world but take a leadership position as well.”
An additional criterion of average daily ‘deliverable' value in the cash market of Rs 10 has also been prescribed.The enhanced criteria need to be met for a continuous period of six months.To begin with, SEBI said that stocks which are currently in derivatives but fail to meet any of the enhanced criteria, would be physically settled.
Sebi also introduced the concept of ‘product suitability’ under which investors will have to demonstrate income or knowledge proof to deal in the derivatives segment. According to the new framework, individual investors can take free exposure to markets (both cash and derivative) only up to a certain amount which would be decided based on their total disclosed income as per tax filings. In cases investor chooses to take exposure beyond the specified limit, Sebi has directed brokers to undertake rigorous due diligence and collect appropriate documentation.
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