SEBI proposes curbs on derivative-linked share moves

Restrictions regarding derivative-linked share moves with extreme disparities in price appear as Adani-Hindenburg case arises

Securities and Exchange Board of India, Mumbai. File

The Securities and Exchange Board of India (SEBI), India’s market regulator, proposes measures to contain extreme price movements in shares on which futures and options trade, including longer trading suspensions and restricting price movements.

SEBI proposed in a consultation paper late on May 21 that if a share in the futures and options segment falls or rises by 10% a day, trading would be suspended for an hour, up from the current fifteen minutes, and then allowed to move only a further 2%, down from the current 5%.

The proposed restrictions follow a free fall this year in shares of billionaire Gautam Adani's group companies after U.S.- based short seller Hindenburg Research raised governance concerns in January. The group collectively lost more than $100 billion in market value soon after the Hindenburg report was published.

If shares are flagged for additional surveillance and monitoring should there be a daily limit for price moves, the regulator said.

"From the perspective of market stability, risk management and protecting the interest of investors, it is desirable to have safeguards against such extreme price movements, SEBI said.