Sebi Tightens Derivative Market Rules: Key Proposals & Impact

Sebi Proposes Stricter Rules for Derivative Markets

In a move to mitigate market risks, the Securities and Exchange Board of India (SEBI) has introduced new proposals aimed at tightening regulations for derivative markets. These proposals focus on lowering position limits for equity stock derivatives and tightening rules for index derivatives.

Following Previous Changes

These fresh proposals follow changes announced in October, where SEBI raised the entry barrier for derivatives trading and increased trading costs to better protect retail investors.

Concerns Over Market Volatility

The new measures are being considered against a backdrop of concerns that volatility from the futures and options market is impacting the broader stock market. The stock market has experienced a decline after reaching record highs in September 2024.

Proposed Changes

Here's a breakdown of the key proposals:

• Equity Stock Derivatives: SEBI proposes linking the market-wide position limit for single-stock derivatives to the cash markets. This position limit would be set at the lower of 15% of the free-float market capitalization of a stock or 60-times the average daily delivery value.
• Index Derivatives: The regulator proposes stricter criteria for offering derivatives on indices other than the BSE Sensex and NSE Nifty 50. These indices must meet certain requirements to be eligible for derivative contracts.

Rationale Behind the Proposals

SEBI believes that the new measures will:

• Reduce potential market manipulation.
• Better align derivatives risk with underlying cash market liquidity.
• Ensure that derivative contracts are only introduced on indices with a minimum of 14 constituents.
• Prevent excessive concentration in a few stocks, which could lead to market manipulation and volatility. The combined weight of the top three constituents of the indexes should be less than 45%, and the top constituent should not have a weight of more than 20%.

Pre-Open Session for Futures Market

SEBI has also proposed introducing a pre-open session to the futures market, similar to the practice in the cash market. This would initially apply to current-month futures on both single stocks and indices.

Seeking Market Feedback

SEBI has invited feedback on these proposals from market participants until March 17.

Disclaimer: The views and investment tips expressed in this article are for informational purposes only and do not represent financial advice. The views expressed are those of the sources cited and not necessarily those of this website or its management. Investing in equities or other financial instruments carries the risk of financial loss. Readers must exercise due caution and conduct their own research before making any investment decisions. We are not liable for any losses incurred as a result of decisions made based on this article. Please consult a qualified financial advisor before making any investment.

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SBI Mutual Fund Launches Rs 250 SIP Under 'JanNivesh' Scheme

SBI MF Launches Rs 250 SIPs Under 'JanNivesh' Scheme

The SBI Mutual Fund has introduced the 'JanNivesh SIP' scheme, enabling micro systematic investment plans (SIPs) starting from just Rs 250. SEBI Chairperson Madhabi Puri Buch stated that a Rs 250 SIP was "one of my fondest dreams."

Making Investments Affordable

Launched in collaboration with SBI Bank, the initiative aims to make wealth creation more accessible to a wider section of Indian households. The SEBI consultation paper released on January 22 also suggested a Rs 500 incentive for educating first-time mutual fund investors.

Financial Inclusion at Scale

Buch emphasized that foreign investors often find it hard to believe that a Rs 250 SIP can be viable. However, India's financial ecosystem has made it sustainable through collaboration among banks, RTAs, KRAs, and depositories.

Challenges in Micro-SIPs

One of the key obstacles in launching micro-SIPs has been ensuring their economic viability. Previous Rs 100 and Rs 500 SIP products faced operational cost issues, limiting their promotion. This time, SBI has ensured that the break-even period remains within 2-3 years, making it financially feasible.

Transaction Fee Waivers

To encourage participation, SBI Bank announced the waiver of transaction charges for these micro-SIPs. This ensures that every rupee invested directly contributes to wealth creation.

Role of Technology

Technology has played a crucial role in making small-ticket investments profitable. With digital platforms like Paytm, Groww, and Zerodha facilitating investments, financial inclusion is reaching even remote areas.

Bridging the Wealth Gap

According to Buch, initiatives like ‘JanNivesh’ will bridge the gap between urban India and rural Bharat, ensuring wealth distribution across all economic segments.

Where to Invest?

Currently, this SIP option is available for the SBI Balanced Advantage Fund and can be accessed via SBI YONO and other financial platforms.

Conclusion

The 'JanNivesh SIP' is a revolutionary step toward inclusive financial growth, enabling millions of Indians to invest and build long-term wealth.

Disclaimer: Investments in mutual funds are subject to market risks. Please read the offer document carefully before investing.

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Nithin Kamath: Digital Fraud Concerns & SEBI, RBI Actions

Nithin Kamath Highlights Rise in Digital Frauds, Urges SEBI and RBI to Take More Action

Nithin Kamath, the founder and CEO of Zerodha, has voiced concerns regarding the increasing prevalence of fake apps impersonating banks, brokers, and payment platforms. His remarks, shared on social media, follow the Reserve Bank of India's (RBI) recent initiative to introduce an exclusive 'bank.in' domain for Indian banks, aimed at combating phishing and online fraud.

Growing Concerns Over Digital Fraud

Kamath emphasized the escalating variety of digital frauds and cautioned that artificial intelligence (AI) could further exacerbate the issue. While acknowledging the efforts of regulatory bodies like the RBI and the Securities and Exchange Board of India (SEBI), he stressed the need for more decisive action, particularly in addressing fake financial apps that mimic legitimate platforms.

SEBI's Proposed UPI ID System

Kamath referenced SEBI's recently released consultation paper, which proposes a unique UPI ID system for registered brokers. Under this proposal, brokers and mutual funds would be assigned UPI handles with the "@payright" identifier, followed by the bank’s name. For instance, a registered broker’s UPI ID might be formatted as “abc.bkr@payrighthdfc.”

This initiative aims to ensure that investors transfer funds only to SEBI-registered intermediaries and not to fraudulent entities using deceptive UPI IDs. A green triangle with a thumbs-up icon would signify verified transactions, helping users distinguish between legitimate brokers and scammers.

RBI's 'bank.in' Domain Initiative

The RBI’s initiative to implement the 'bank.in' domain represents another significant step toward securing digital financial services. This measure aims to prevent phishing scams, which often involve fraudulent websites mimicking bank portals. The domain will be exclusively available to Indian banks, making it easier for users to verify the authenticity of bank websites.

The registration process, overseen by the Institute for Development and Research in Banking Technology, is scheduled to begin in April 2025. The RBI also plans to introduce a similar "fin.in" domain for non-banking financial entities.

The Urgent Need to Address Fake Financial Apps

Kamath underscored that while these measures address website and payment fraud, regulators must also prioritize the removal of fake financial apps, which pose a growing threat to users. These apps can deceive users into providing sensitive financial information, leading to potential losses.

By taking comprehensive action against both website and app-based fraud, regulators can create a safer digital financial environment for investors and consumers.

Disclaimer: The views and investment tips expressed in this article are for informational purposes only and do not represent financial advice. The views expressed are those of the sources cited and not necessarily those of this website or its management. Investing in equities or other financial instruments carries the risk of financial loss. Readers must exercise due caution and conduct their own research before making any investment decisions. We are not liable for any losses incurred as a result of decisions made based on this article. Please consult a qualified financial advisor before making any investment.

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Sebi Proposes Broader Definitions for NPOs and Social Enterprises

Sebi Proposes Broader Definitions for NPOs and Expands Social Enterprise Activities

Expanded Definitions for NPOs

The Securities and Exchange Board of India (Sebi) has proposed expanding the definition of Not-for-Profit Organizations (NPOs) to include activities like supporting disadvantaged groups and promoting arts and culture as social enterprises. Sebi also proposed allowing NPOs to register on the Social Stock Exchange (SSE) for up to two years without the need to raise funds.

Issues with Current SSE Framework

Many NPOs register with the SSE but do not proceed to listing or renew their registration due to the associated costs, such as annual reporting and social impact assessments. Sebi's consultation paper highlights these issues. The regulator aims to enhance clarity, expand eligibility, and improve transparency within the SSE framework through these changes.

Proposed Changes to the SSE Framework

The Social Stock Exchange Advisory Committee (SSEAC) has recommended several changes, including broadening the list of legal structures recognized as NPOs to include Trusts, Charitable Societies, and Companies. The committee also suggests expanding eligible activities to make the SSE framework more inclusive.

Expanded Eligible Activities

Key proposals involve adding welfare for disadvantaged groups, vocational skills training, environmental stewardship, and promoting arts, culture, and heritage. The scope for sports is expanded to focus on promotion rather than training. Research and development in fields like science and medicine, funded by public entities, are also included.

Enhancing Social Impact Assessment

Sebi proposes replacing "Social Impact Assessment Firm" with "Social Impact Assessment Organization." These organizations should have at least two full-time assessors with a minimum of three years of experience in social impact assessment and should be empanelled by self-regulatory organizations like ICAI, ICSI, or ICMAI. These organizations may employ or engage assessors long-term, emphasizing expertise and competence. The committee also suggests separating annual disclosures into financial and non-financial aspects with revised timelines and recommending separate impact reports for listed and significant non-listed projects.

Improved Governance and Reporting

The proposals include adding tax registration details for NPOs in initial disclosures, along with governance and remuneration information. Annual reports should include governance and financial details, using a logic model for impact reports. Updating governance body details in the reporting annexure is also suggested. Feedback on these proposed changes is sought until February 10.

The SSE framework, introduced in 2022, covers capital issuance, disclosure, and alternative investment funds. As of December 31, 2024, 111 NPOs are registered on the SSE segments of both NSE-SSE and BSE-SSE, and 10 NPOs have raised ₹22 crore through SSE by issuing Zero Coupon Zero Principal instruments. These efforts aim to make the SSE framework more inclusive and aligned with its regulatory goals.

Disclaimer: The views and investment tips expressed in this article are for informational purposes only and do not represent financial advice. The views expressed are those of the sources cited and not necessarily those of this website or its management. Investing in equities or other financial instruments carries the risk of financial loss. Readers must exercise due caution and conduct their own research before making any investment decisions. We are not liable for any losses incurred as a result of decisions made based on this article. Please consult a qualified financial advisor before making any investment.

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