The Securities and Exchange Board of India is in the process of evaluating enhanced disclosure norms for the futures and options market. Madhabi Puri Buch, Chairperson, SEBI, said that the market regulator was evaluating data with regard to derivatives trading, and the form and manner in which disclosures are to be made in this area.

“If somebody wants to trade in the F&O segment we don’t think we should stop them....But 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 at the 19th Annual Capital Markets Conference ‘CAPAM 2022’, organised by FICCI

Rising retail investors

While Buch did not divulge any further details, sources said that SEBI and stock exchanges were likely to come out with enhanced data on derivatives trading in India, which would help investors take a better view of the markets. It is also likely that SEBI may prescribe some norms for retail investors for derivatives trading, the sources said. 

For the past few years, there have been concerns about excessive speculation by retail traders in the derivatives markets. Buch clarified that SEBI did not want to impose any restrictions on investors but just wanted them to have more information and clarity on disclosures, which can help them to choose better. 

Regulators have been discussing minimum networth related criteria for derivatives trading for retail investors for some time now. Sources said the regulator’s board meeting at the end of this month should be watched for some norms on derivatives trading. Buch said that SEBI will shun dogma and would embrace data for forming any new rules and regulations. 

IPO Pricing

SEBI will also ask IPO-bound companies to disclose a firm logic of their pricing to see if the same is higher than the pricing of the placement of the shares done by the company in the preceding fundraising. “A lot has been said about the pricing of IPOs of tech companies at what price you choose to do the IPO is your business, we have no business to suggest otherwise,” Buch said

“If the company coming to IPO three or six months ago has placed its equity with some party (assume private party) at ₹100. And now it wishes to come to the market at ₹450. No problem, we have nothing to say in that. However, expect you to disclose to the investor what accounts for the difference between ₹100 and ₹450. Explain what has changed from the time you placed equity,” she added.

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