Sebi proposes circuit filters for F&O segment to curb price volatility

Source: The Hitavada      Date: 12 Feb 2019 09:30:42


Business Bureau,

To check excessive price movements, capital markets regulator Sebi on Monday proposed a slew of measures including capping the maximum daily movement of up to 20 per cent for all stocks including that 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 by 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 scrips witnessed intra-day movement of over 20 per cent. Out of this, 29 stocks have seen intra-day movement between 20 per cent and 30 per cent. Derivatives markets or F&O segment reflect expectation of spot prices in the future and currently price bands or circuit filters are generally not applied on them. At present, there are over 200 stocks in F&O segment.

Sebi came out with a consultation paper and sought comments from the public till February 20 in this regard.
The final regulation will be out in place 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.
Further, it suggested combination of dynamic and fixed price band or call auction mechanism. The regulator asked whether the current framework for dynamic price band may be allowed to continue with the initial threshold set by the stock exchanges for flexing. This framework would be available up to a threshold (say 30 per cent intra-day movement in either direction).