Ought to Sebi ban weekly choices? Right here’s what Zerodha’s Nithin Kamath thinks

As hypothesis mounts over Sebi’s upcoming session paper that will suggest banning weekly index expiries, Zerodha founder and CEO Nithin Kamath stated that from an outsider’s perspective, an entire ban on weekly choices would make sense.

In a publish on X (previously Twitter), Kamath added that he wouldn’t be shocked if weekly expiries have been banned altogether or if Sebi launched a stricter product suitability framework, making futures and choices buying and selling harder for retail buyers.

“Regulatory danger is by far the most important danger for brokers like us. This danger is magnified much more as a result of most brokers’ earnings are from merchants, and we earn nearly nothing from buyers,” Kamath wrote, pointing to the sharp 40% fall in alternate choice volumes because the variety of weekly expiries was diminished. He added that if the remaining two weekly expiries have been additionally eliminated, volumes would probably drop again to 2019 ranges, a state of affairs that would power brokerages to rethink their enterprise fashions, Kamath, 45, stated.

On his private view, Kamath struck a nuanced observe: As a brokerage CEO, he stated weekly expiries coupled with a product suitability framework “sound cheap,” however as an outsider to the business, he would “perceive the logic behind utterly eradicating weekly expiries.”

Over the previous 12 months, Sebi has been cracking down on the choices market after a number of surveys pointed to heavy retail losses.

Final month, the capital markets regulator floated the thought of extending the maturity and tenure of spinoff contracts. It has additionally lately rolled out contemporary measures to strengthen the market, together with a shift to delta-based calculation of open curiosity as an alternative of notional open curiosity.This variation impacts giant market individuals and will have longer-term implications for buying and selling volumes whereas doubtlessly lowering market volatility.By means of a six-step framework launched late final 12 months, Sebi additionally introduced in a number of checks-ranging from growing the contract measurement of choices to limiting weekly expiries to 1 per alternate. These guidelines adopted a research that discovered retail merchants had gambled away practically Rs 1.8 lakh crore in risky trades over the previous three years.

(Disclaimer: Suggestions, ideas, views, and opinions given by the specialists are their very own. These don’t signify the views of The Financial Occasions)