Over the last 12 months, the number of active accounts with the top five brokers has fallen by 25 lakh, and overall active accounts have declined by 50 lakh. This is happening in a country where India still has far fewer investors per 100 people compared to global standards.
In the last 5–10 years, we’ve seen the launch of multiple weekly expiries — first BANKNIFTY, then NIFTY, followed by FINNIFTY, MIDCPNIFTY (why this index instead of MIDCAP150 remains unclear), and even BSE indices like SENSEX and BANKEX (which seems redundant compared to BANKNIFTY). SEBI did not stop exchanges from launching these products. Why was that acceptable then?
At the same time, thriving currency derivatives trading was abruptly shut down overnight by a sudden rule change. Add to that, SEBI has made frequent regulatory changes — almost every other month — creating constant uncertainty. Meanwhile, large global firms like Jane Street were thriving, and we now know they were manipulating the market to their advantage. Yet instead of restricting such players, SEBI’s response is to ban weekly expiries altogether. Does that make sense? Why destroy an entire market that has grown to be the largest derivatives market in the world?
And now, reports suggest SEBI wants to allow FPIs and banks to trade in commodity derivatives. Have they forgotten the role of investment banks in triggering the 2008 global financial crisis?
If weekly expiries are banned, participants will simply move elsewhere — crypto, lotteries, horse racing, forex, foreign markets, or even leave India altogether. Later, we’ll wonder why capital and talent migrate abroad. The answer is simple: people move where the environment is stable and market-friendly. If India provides that, they’ll stay.
What SEBI should do instead:
- Focus on preventing manipulation — by brokers, exchanges, prop desks, and hedge funds. SEBI has both the authority and resources to do this.
- Study global practices and adopt better versions tailored for India.
- Stop interfering with products that work well and have strong participation.
A few specific reforms SEBI can consider:
- Standardize lot sizes across stocks and indices (e.g., 100).
- Simplify margin rules:
- For spreads, margin should just be width × lot size (e.g., 50 × 100 = ₹5,000).
- For iron condors, charge margin only on one side.
- For covered calls or cash-secured puts, stock credit and option debit/credit should offset each other transparently.
- Boost cash market participation: remove STT and unnecessary taxes. (Brokers already offer zero brokerage on cash trades — but taxes remain a deterrent.)
We know the SEBI Chairman stays in a ₹7 lakh per month residence. The real question is: will he deliver reforms that actually strengthen India’s markets, or keep stifling them with arbitrary rules?