Connect with us

Business

India tightens derivatives trading rules after retail options frenzy

Published

on

Unlock the Editor’s Digest for free

India’s capital markets regulator has raised the barriers on derivatives trading to curb the frenzy among millions of young retail investors who have piled into high-risk options and short-term bets on the country’s booming stock market.

The Securities and Exchange Board of India on Tuesday imposed tough measures including raising the minimum contract size on index derivatives by about three times to at least Rs1.5mn ($18,000). It also reduced the amount of tradable weekly options contracts to one per exchange from November.

Advertisement

The crackdown comes after the watchdog and India’s finance ministry repeatedly issued warnings about the risks involved in derivatives markets. Investors can use options to leverage their bets, by borrowing many times the amount they have on deposit, but they can magnify losses as well as gains.

The Indian stock market has soared in recent years as the country has become the world’s fastest growing large economy. While its expanding number of middle-class households are increasingly investing their savings in domestic equities, analysts have likened the fevered interest in derivatives trading to gambling in a nation where betting is not legal.

“The equity cult has been going up in India,” said Kranthi Bathini, director of equity strategy at WealthMills Securities in Mumbai.

The problem is “uninformed, uneducated investors are becoming prey to this retail speculative frenzy, that’s where the regulator and the ministry of finance is concerned”, he added.

Advertisement

Many Indians have also been spurred on by a proliferation of cheap discount online brokerages and popular, if largely unregulated, “finfluencers” who dish out trading tips on social media.

In a recent study, Sebi said fewer than one in 10 future and options traders made a profit. Its latest order noted the trend of “increased retail participation” as well as “heightened speculative trading columns in index derivatives on expiry day”.

Research by Mumbai-based Axis Mutual Fund found that the number of active derivatives traders in India shot up to 4mn last year compared with fewer than 500,000 before the coronavirus pandemic. Most of them resided in the country’s smaller cities and were below the age of 40.

The trend has drawn wider global attention after the notional value of options on India’s benchmark Nifty 50 index overtook those on the S&P 500 and quant trading firm Jane Street reportedly made $1bn on trades in the country’s option market last year.

Advertisement

Sebi’s action is just the latest attempt to cool India’s retail trading mania. While its latest order was published after local market hours, in July shares of listed Indian brokerages, which have cashed in on the derivatives boom, fell after new rules mandated uniform charges that are not discounted for high volumes.

The regulator’s new curbs would “have some impact”, Bathini said.

Source link

Advertisement
Continue Reading
Advertisement
Click to comment

You must be logged in to post a comment Login

Leave a Reply

Travel

Louvre Hotels Group to offer 1,000 more keys in Saudi Arabia by 2027

Published

on

Louvre Hotels Group to offer 1,000 more keys in Saudi Arabia by 2027

Louvre Hotels Group has announced plans to launch 1,000 additional keys in the kingdom of Saudi Arabia within the next three years

Continue reading Louvre Hotels Group to offer 1,000 more keys in Saudi Arabia by 2027 at Business Traveller.

Source link

Advertisement
Continue Reading

Business

Comparing tax to Mafia ‘pizzu’ was inappropriate

Published

on

Banker all-nighters create productivity paradox

The comparison that your FT Money columnist Moira O’Neill draws between the Mafia “pizzu” and tax is inappropriate and wrong (“Should you ‘fill to the max’ on tax-free allowances?”, Opinion, FT Money, FT Weekend, September 21).

Pizzu is an illegal payment extracted by organised crime groups, through threats of violence or intimidation, in exchange for “protection”. Taxation, on the other hand, is at the core of the social contract between the state and its citizens and is based on governance and accountability.

In modern democracies, taxes are legally enforced contributions to fund public services such as healthcare, education, infrastructure, defence and social welfare. Transparency and accountability mechanisms exist to prevent misuse of tax revenues.

The level of taxation — and public expenditure — depends on voters’ preferences, and tax rates and spending are typically decided by elected representatives. Citizens can vote, engage in protest, or influence policy to change how taxes are levied or spent.

Advertisement

Some societies may prefer, for instance, to restrict the range of public services in exchange for a lower level of taxation and let services such as healthcare to be mostly privately funded.

Modern democracies began with the citizens’ demand to have a say on how much they pay and to no longer be burdened with taxes decided elsewhere — no more taxation without representation.

Taxes are often perceived as unfair, but drawing a comparison with the pizzu confuses purposes, context and legality — or lack of it. Above all, it overlooks the fundamental role of democracy, governance, law, and the provision of public services and collective goods that taxes support.

Paola Subacchi
Professor of Economics, Sciences Po, Paris and Essential Economics, London W1, UK

Advertisement

Source link

Continue Reading

Business

Letter: Politicians are ‘Fachidioten’

Published

on

Banker all-nighters create productivity paradox

Just a small feedback on Janan Ganesh’s piece on “The end of the popular politician” (Opinion, September 26).

It may well be that a spoilt vote reflects a general dissatisfaction with politicians. But I would rather say that voters can’t be fooled so easily any more. The requirements of a politician have not changed much for at least half a century. Almost by definition, politicians of western democracies are amateurs. Even worse, politicians refuse to raise the standards of their profession.

Singapore is a pretty good example of how professional politicians can do a much better job than their western “amateur” counterparts. Or let me use a word from my German mother tongue — Fachidiot — which means a one-track specialised idiot, who is an expert in his or her field but takes a blinkered approach to multi-faceted problems, what you might call an expert idiot. That describes our politicians.

What the west needs is minimum standards for politicians, which are generally accepted for the profession. When an employer searches for a medical doctor, why would we look for qualifications fitting a carpenter?

Advertisement

We demand licences for drivers, lawyers, doctors and many other professions. By contrast, any idiot can be a politician!

Matthias Abold
Chumphon, Thailand

Source link

Advertisement
Continue Reading

Business

Critique of Streeting’s diagnosis for the NHS

Published

on

Banker all-nighters create productivity paradox

Wes Streeting’s comments to the FT Weekend Festival on suggested remedies for our ailing and failing NHS (Report, September 7) made good sense yet seemed short-sighted.

Apart from an essential question of how will his mooted expansion and tightening of services be funded and supported, there seem serious limitations in Streeting’s understanding of many aspects of healthcare. In brief, the health secretary’s suggestions may be effective for procedurally curable conditions (treatment-based), but are often unsuitable for those many problems that cannot be decisively fixed (the care-based).

Streeting (and many other health pundits) are correct in their championing of more and better technologies to deliver speedier and better impersonal treatments.

Yet, in fact, the bulk of NHS consultations are not of this kind. Most treatments are “people-work”, where any science or technology is skilfully subordinated to attuned understandings of personal experience, relationship and meaning. This is pastoral healthcare.

Advertisement

The kind of technologies that are now so indispensable to — say — the highly efficient tracing, tracking and treating certain malignant diseases, are often less than helpful in dealing — say — with a rebelliously recalcitrant and chaotic adolescent diabetic, or an embitteredly grieving widow who turns to drink.

For all its inconsistencies and technological primitiveness, our erstwhile NHS was often able to provide pastoral healthcare far more readily.

This was due largely to a system that encouraged personal bonds and understandings — for example, small local GP practices with personal lists, hospital consultant-led firms with designated wards and support teams.

We cannot now, of course, exactly replicate those times, but we can re-view them, take and replant their more vital “cuttings” into our now humanly impoverished and troubled NHS.

Advertisement

Will this new government have the wisdom and courage to do this?

Dr David Zigmond
Executive Committee, Doctors for the NHS, London N8, UK

Source link

Advertisement
Continue Reading

Travel

Rove Hotels and IRTH Group to launch Rove Home branded residences in Dubai Marina

Published

on

Rove Hotels and IRTH Group to launch Rove Home branded residences in Dubai Marina

Rove Hotels has announced that it will be collaborating with IRTH Group to launch the Rove Home Dubai Marina, a new residential development in the heart of Dubai Marina. Marking an exciting new chapter for the dynamic UAE-based brand, the new development promises a unique style and innovative spirit for a fresh, vibrant take on modern living.

Rove Home Dubai Marina will be offering buyers the chance to secure an off-plan property in this highly coveted neighbourhood.

Continue reading Rove Hotels and IRTH Group to launch Rove Home branded residences in Dubai Marina at Business Traveller.

Source link

Advertisement
Continue Reading

Business

Mexico’s first female president takes power with pledge of continuity

Published

on

Unlock the Editor’s Digest for free

Mexico’s first female president, Claudia Sheinbaum, took office promising continuity with her predecessor and hitting back at critics who fear the country is sliding away from multi-party democracy.

Sheinbaum, a former Mexico City mayor, has sweeping powers to change the constitution after a landslide election victory but will be limited by the political confines laid out by her mentor, outgoing president Andrés Manuel López Obrador.

Advertisement

In a firm speech to lawmakers, Latin American presidents and US first lady Jill Biden on Tuesday, Sheinbaum praised López Obrador and pledged to maintain his social policies while emphasising women’s rights, green energy and new passenger railways.

She also hit back at criticism that her government would continue López Obrador’s erosion of democratic norms.

“Anyone who says there will be authoritarianism is lying,” she said in the lower house after her swearing-in. “We are democrats, human rights will be respected.”

Sheinbaum takes office as swaths of the country are living under the control of organised crime, an already-weak economy is slowing and Mexicans are grappling with a sharp deterioration in public healthcare.

Advertisement

The ruling party Morena has consolidated power over the past six years, including holding two-thirds of governorships and congress, while López Obrador has weakened checks on presidential power.

Sheinbaum’s technical style and background as an energy academic have led some to believe she will make a break from her populist predecessor. But her inaugural address signalled continuity, which could trouble critics and opposition figures who fear she will maintain López Obrador’s policies to defund, attack and eliminate Mexico’s independent institutions.

“There’s nothing that indicates a change in . . . how power is exercised,” said opposition lawmaker Claudia Ruiz Massieu. “The coming years are going to be very complicated for those of us who don’t agree with the regime.”

The country’s polarised politics were evident on the streets of the capital on Tuesday. Hundreds marched against a controversial overhaul of the judiciary, while tens of thousands of Morena supporters, buoyed by the party’s social programmes and rising wages, filled the main square, waving flags and chanting for the outgoing leader.

Advertisement

“This is history in the making . . . as women, we’re counting on her to give us all her support, just like the president [López Obrador] did,” said Graciela Hernández, 62, who came out to support Sheinbaum.

Sheinbaum is a longtime activist who grew up in leftwing intellectual circles. On Monday, Colombia’s President Gustavo Petro told media she used to be a member of M-19, the urban leftist-nationalist guerrilla group to which he also belonged. A spokesperson for Sheinbaum did not respond to a request for comment.

The incoming president inherits Mexico’s largest budget deficit since the 1980s. Sheinbaum has said she would be fiscally responsible and maintain a “reasonable” debt level but has also promised new social programmes and significant public infrastructure investment.

“The fiscal situation is not what she painted, there will have to be significant cuts,” said Luis Rubio, chair of the independent México Evalúa think-tank. “She’ll have to move away from [López Obrador], and I think that’s the moment in which politically it’s going to be very complicated.”

Sheinbaum has also promised to present a national energy plan in the coming days with ambitious renewables targets, though how she will reconcile those goals with her commitment to state dominance of the sector is unclear.

Lacking López Obrador’s charisma and facing a mounting list of challenges, Sheinbaum will not have long to flesh out her plans.

“Her strengths are not in politicking or narrative building, so she’ll have to deliver,” Rubio said.

Advertisement

Source link

Continue Reading

Trending

Copyright © 2024 WordupNews.com