By Jayshree P Upadhyay
MUMBAI (Reuters) – India’s market regulator is likely to tighten rules for stocks to qualify for derivatives trading and will ask brokers and mutual funds to stop using unregistered financial influencers for their marketing campaigns, two sources said. direct knowledge of the matter.
These steps, aimed at preventing market manipulation following the explosive growth in trading in complex financial instruments, are likely to take place at the board meeting of the Securities and Exchange Board of India (SEBI) on Thursday, said the sources, who declined to be named they are not authorized to speak to the media.
Earlier this month, the market regulator said in a discussion paper that equity derivatives should have sufficient liquidity and trading interest from market participants, a move expected to root out derivatives linked to illiquid stocks.
SEBI did not immediately respond to an email from Reuters seeking comment.
The notional value of options – derivative contracts that offer investors the opportunity to buy or sell a security at a fixed price in a future transaction – traded in India more than doubled to $907.09 trillion in 2023-2024 compared to the previous year.
Most options trading in India takes place on the basis of index option contracts. While the regulator has not yet taken any steps to regulate index options, it is considering a range of technical adjustments, Reuters reported earlier this month.
A surge in retail investor participation in the stock markets during the COVID-19 pandemic led to a proliferation of influencers pushing financial advice on social media platforms.
To ensure that financial influencers do not mislead investors, the market regulator has proposed that brokers and mutual funds should no longer deal with unregistered influencers.
More broadly, the regulator this week formed a group of exchanges, brokers and investment funds “to propose any additional changes necessary to remove the risk of manipulation and ensure that retail investors are protected from risks in options contracts” , one of the sources said.
On Thursday, the market regulator’s board will also consider changes to delisting rules to make it easier for companies to leave stock exchanges.
