Tough times ahead for broking industry: Zerodha's Nithin Kamath amid SEBI's stance on derivative products
Tough times ahead for broking industry: Zerodha's Nithin Kamath amid SEBI's stance on derivative products
Zerodha's Nithin Kamath on Friday (June 28) raised concerns over the future of India's broking industry. This comes in light of SEBI Chairperson Madhabi Puri Buch's remarks indicating openness to removing derivative products.
Kamath highlighted the growth in index options trading volumes, soaring from 4.6 lakh crore in 2018 to a 138 lakh crore by 2024.
Notably, retail participation in these trades has surged from 2% to 41%.
"Regulatory risk is the biggest challenge for any regulated business," Kamath said on platform X.
He acknowledged the impact such changes could have on industry revenues.
He stressed that while Zerodha has benefited from the boom in trading volumes, the regulatory uncertainties pose significant threats, compelling the firm to refrain from making forward projections.
Kamath's raised concerns while quoting a Moneycontrol story with the header "Kal Ho Na Ho."
This reference emphasises his caution regarding the unpredictable future of options trading regulations in India.
The concerns voiced by Kamath echo remarks by Madhabi Puri Buch, Chairperson of the Securities and Exchange Board of India (SEBI), during a press conference.
Buch indicated that SEBI will be open to taking derivative products off the shelf if the expert committee deliberating on the F&O segment recommends it.
Buch said SEBI had noticed concentration of trading in weekly options and on expiry day which was driven purely by speculation, not hedging.
She pointed out instances where speculative trading has led individuals into severe financial distress, including cases of losing homes due to borrowed funds.
Responding to whether such measures would be seen as regressive, Buch stated, "Not at all."
She said that if the data and expert opinions support the removal of certain products, the market regulator would not hesitate to act.