Unchecked explosion in retail F&O trading can create challenges: FM

Finance Minister Nirmala Sitharaman emphasizes the need for market stability, investor confidence, and regulatory compliance in retail trading.

Any “unchecked explosion” in retail trading of Futures and Options (F&O) can create future challenges, not just for the markets but also for investor sentiments and also household finances, Finance Minister Nirmala Sitharaman said here on Tuesday.

“Household finances have made a generational shift. We want to safeguard that and ensure that it is not going to be shattered. We need to have both BSE and NSE, ensuring market stability, mitigating systemic risks, and making sure that the stock exchanges will leverage technology and adopt block chain and AI and have big data to improve efficiency and transparency and security,” she said while speaking at event organised at the BSE. 

“I would appeal to the BSE that you should work with the SEBI in order to ensure stringent compliance and robust regulatory standards so that further investors’ confidence grows. You are doing it, but I appeal to you that you work closely with the SEBI,” she said.

For the markets to be efficient, Ms. Sitharaman said the stability of the government and policy, particularly taxation policy, and predictability were important.

“These are the high points with which markets become efficient and function without volatility,” she said.

The FM said that persistent flows of domestic savings towards the stock market had actually played an important role in counterbalancing Foreign Portfolio Investors (FPIs) who come and go. 

“There may not be actually any fluctuation despite the whimsical FPI movements. Indians own savings that are coming from small retail investors [and] providing the shock absorber,” she added.