By: Jayshree P. Upadhyay
MUMBAI (Reuters) – India’s markets regulator is likely to tighten rules for stocks that allow derivatives trading and ask brokers and mutual funds to stop using unregistered financial influencers for their marketing campaigns, two sources with direct knowledge of the matter said.
The steps, aimed at preventing market manipulation following the explosion in trading in complex financial instruments, are likely to be taken at the Securities and Exchange Board of India (SEBI) board meeting on Thursday, the sources said, requesting anonymity. have no right to communicate with the media.
Earlier this month, the markets regulator said in a discussion paper that equity derivatives must have sufficient liquidity and trading interest from market participants. The move is expected to weed out derivatives linked to illiquid stocks.
SEBI did not immediately respond to an email from Reuters seeking comment.
The notional value of options – derivative contracts that give investors the option to buy or sell securities at a fixed price in a future transaction – traded in India more than doubled in 2023-24 to $907.09 trillion from a year earlier.
Most options trading in India occurs through index options contracts. While the regulator has yet to take any steps to regulate index options, it is considering a number of technical changes, Reuters reported earlier this month.
The surge in retail investor participation in stock markets during the COVID-19 pandemic has led to an increase in the number of influencers promoting financial advice on social media platforms.
To prevent financial influencers from misleading investors, the market regulator has asked brokers and mutual funds to stop doing business with unregistered influencers.
More broadly, the regulator this week formed a panel of exchanges, brokers and mutual funds “to propose any additional changes needed to address the risk of manipulation and ensure retail investors are protected from risk in options contracts,” one of the sources said.
On Thursday, the markets regulator’s council will also consider changes to delisting rules to make it easier for companies to exit stock exchanges.