Sebi proposes circuit filters for F&O segment

To check excessive price movements, the Securities and Exchange Board of India (Sebi) on Monday proposed a slew of measures, including capping the maximum daily movement of up to 20 per cent for all stocks. This includes those which are part of the future and options (F&O) segment.

There have been concerns that investors’ wealth is getting wiped out in a single day, evident from the recent falls in stocks on which derivative products are available, as no price band are applicable on them. Besides, sharp plunge in the shares of several companies, including Dewan Housing Finance and e-commerce player Infibeam have been noticed in recent times.

According to Sebi, the examination of price movement of scrips, on which derivatives are available, during the last six months, revealed 40 of them witnessed intra-day movement of over 20 per cent. Of this, 29 have seen intra-day movement between 20 per cent and 30 per cent.

Derivatives markets or F&O segment reflect expectations of spot prices in the future. Currently, the price bands or circuit filters are generally not applied on them. At present, there are over 200 stocks in F&O segment. To address the concerns arising out of significant price movements in scrips having presence in the derivatives segment, Sebi came out with a consultation paper, and sought comments from the public till February 20.

The final regulation will be out after taking into account suggestions of all stakeholders. The regulator has asked whether individual scrip-wise price bands of 20 per cent either way be adopted for all scrips, including scrips on which derivatives are available, in the compulsory rolling settlement.