Sebi to take measure for F&O segment soon; calls for tax breaks on municipal bonds

New Delhi: Capital markets regulator Sebi is expected to take measures regarding the Futures and Options (F&O) segment very soon, in a bid to enhance investor protection, its senior official said on Tuesday.

. In addition, Sebi has urged the government to introduce tax breaks for subscribers of municipal bonds, which are crucial for funding infrastructure development.

. The regulator will make a case for a tax break for municipal bonds during a meeting with the finance commission, the regulator's whole time member Ashwani Bhatia said here.

. Since 1997, municipalities have raised Rs 2,700 crore through bonds for infrastructure projects.

.Air India Express-AIX Connect merger: 'Important milestone in transformation journey,' says Campbell Wilson. Talking about F&O, Bhatia said," Sebi is very soon going to do something about F&O. Study has come (recently)".

. The regulator, in its consultation paper recently, proposed seven measures to tighten the rules for index derivatives-- revise the minimum contract size and require upfront collection of option premiums intra-day monitoring of position limits, rationalisation of strike prices, removal of calendar spread benefit on expiry day and increase in near contract expiry margin.

. If implemented, these measures would help in improving risk management and increase transparency in the derivatives market.

. In its consultation paper, the regulator had suggested to revise the minimum contract size for index derivatives in two phases, considering market growth.

. In phase 1, the minimum contract value at the time of introduction should be between Rs 15 lakh and Rs 20 lakh. After six months, phase 2 will raise the minimum value to between Rs 20 lakh and Rs 30 lakh.

. The current minimum contract size of Rs 5 lakh to Rs 10 lakh was last set in 2015.

. A recent study by Sebi revealed that 93 per cent of over 1 crore individual F&O traders incurred average losses of around Rs 2 lakh per trader (inclusive of transaction costs) during the three years from FY22 to FY24. The aggregate losses of individual traders exceeded Rs 1.8 lakh crore over the three-year period between FY22 and FY24.

. The report highlights an increase in the loss-making individual investors in F&O compared to 89 per cent in FY22.

Sebi to take measure for F&O segment soon; calls for tax breaks on municipal bonds

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