SEBI may bring equity derivatives segment under long-term additional surveillance measures

July 30, 2023

ASM framework protects investor interest by placing scrips under restriction to prevent market speculation

After asking stockbrokers to display ‘risk disclosures’ for F&O clients, SEBI is now planning to put equity derivatives segment under long-term additional surveillance measures (ASM). 

ASM framework already exists for the equity markets, and it protects investor interest by placing scrips under restriction to prevent market speculation and manipulations. The stocks are moved to the ASM category based on certain criteria.

Recently, an expert panel set up by the Supreme Court had observed that the element of human discretion in surveillance actions should be done away with, as far as possible and inclusion of stock-specific derivatives must be automatic and machine-based. 

Investor protection
SEBI has been trying to protect investors in the derivative market after a recent study found that 9 out of 10 individual traders were making losses in the F&O segment. They made an average loss of ₹1.1 lakh during financial year 2022. As high as 90 per cent of active traders incurred an average loss of ₹1.25 lakh. According to SEBI, samples from only the top 10 brokers showed that in FY22 there were 45.2 lakh unique individual traders in the F&O segment, up from just 7.1 lakh in FY19. Of this, 88 per cent were active traders, who were making consistent losses. 

[The Hindu Business Line]