How can Sebi moderate India’s derivatives cholesterol?
Derivatives are like cholesterol in the human bodyuseful in moderate amounts, dangerous in excess
The Securities and Exchange Board of India (Sebi) has released a discussion paper on Growth And Development Of Equity Derivative Market in India. The discussion paper is replete with data on the structure of India’s equity markets across stocks and derivatives. The paper concludes that the market is disproportionately skewed towards derivatives and invites suggestions for policy interventions to correct this abnormality. Sebi must be lauded for raising important policy issues in the public domain, backed by rigorous data and analysis. This piece analyses whether India’s equity markets are indeed speculative in nature and if yes, whether policy interventions are necessary, whether they work, and if they do, what some of the appropriate policy ideas could be.