SEBI Scoffs F&O Curbs, Prioritizes Bond Market Reforms Post-Budget

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AuthorKavya Nair|Published at:
SEBI Scoffs F&O Curbs, Prioritizes Bond Market Reforms Post-Budget
Overview

Securities and Exchange Board of India Chairman Tuhin Kanta Pandey clarified that the regulator is not contemplating any immediate curbs on the equity derivatives (F&O) segment. This stance comes even after the recent increase in transaction taxes on derivatives in the Union Budget 2026-27. Instead, SEBI will now sharpen its focus on deepening the corporate bond market, emphasizing its critical role in funding India's growth beyond traditional bank credit.

SEBI Maintains F&O Stance Amidst Tax Adjustments

Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey has firmly stated that no fresh regulatory actions are planned for the equity derivatives (F&O) segment at this juncture. The existing framework, including the widely used weekly expiry structure, will remain in place. These comments follow the Union Budget 2026-27's move to increase Securities Transaction Tax (STT) on derivatives, aimed at curbing speculative trading activities. Pandey assured that "whatever framework that we have put in place, that will continue," signaling stability for F&O market participants. The STT on futures contracts has been adjusted to 0.05 per cent from 0.02 per cent, while options premium and exercise taxes have risen to 0.15 per cent and 0.125 per cent, respectively, with other STT rates holding steady.

Deep Dive into Corporate Bond Market Expansion

With the derivatives segment seeing tax adjustments, SEBI is pivoting its strategic focus towards developing India's corporate bond market. Pandey highlighted that sustained economic growth necessitates a robust debt market, moving beyond sole reliance on bank credit. Outstanding corporate bonds have seen substantial growth, escalating from approximately ₹17.5 trillion in fiscal year 2015 to nearly ₹58 trillion by December 2025. This expansion represents a significant increase, now accounting for about 60 per cent of bank credit to industry and services. However, corporate bonds still represent only around 16 per cent of the Gross Domestic Product (GDP), lagging behind comparable Asian markets.

Addressing Market Challenges and Future Reforms

Key hurdles identified by SEBI include a narrow issuer base, with only about 770 companies accessing the debt market compared to over 5,600 listed in equities, and critically low retail participation, with awareness hovering around 10 per cent. To combat this, SEBI has implemented "optimum regulation" strategies. These include easing compliance burdens for high-value listed entities, reducing the minimum investment threshold to ₹10,000, promoting online bond platforms, and bolstering market infrastructure. Further reforms proposed in the Budget, such as market-making frameworks and bond index derivatives, are now under stakeholder engagement, aiming to enhance secondary market liquidity. Pandey also noted that reducing trade friction, as seen in recent deals with the US, can significantly spur capital formation and attract investment flows.

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