Latest news with #FSRs
Mint
31-07-2025
- Business
- Mint
Indira Rajaraman: Consider turfing out short-term equity derivatives
Jane Street. When the name surfaced in the financial press, it looked like a new designer clothing label. I discovered it was a trading house which had come into focus at the Securities and Exchange Board of India (Sebi), the equity market watchdog, for alleged manipulation. In focus was something called a Bank Nifty weekly options index (now closed), but there remain other weekly indices, run by the National Stock Exchange and Bombay Stock Exchange. Having never engaged with the stock market, either financially or academically, I had never peered at those instruments. But the compelling reason for not neglecting them now is that index options have entered the pages of the half-yearly Financial Stability Report (FSR) issued by the Reserve Bank of India (RBI), including the latest June 2025 issue. Financial Stability Reports are an outcome of the global financial crisis of 2008. The G-20, as a wider group of countries than the G-7, also emerged as an outcome of that crisis. The International Monetary Fund (IMF) exhorted member countries to issue periodic reports on their internal financial stability. In India, this responsibility fell to RBI. The FSRs of RBI are very well-written, and should be compulsory reading for all students of economics at any level. My sense, though, is that they are not very widely read (I hope I am wrong on this). Also Read: Somnath Mukherjee: Sebi's Jane Street order was the canary our market needed The FSR has to be optimistic overall, since any alarm bells could by themselves be triggers for financial instability. Wisely, RBI collects opinions by circulating a questionnaire among an anonymous panel of (unpaid) respondents as part of a Systemic Risk Survey, tabulated in an Annex of every FSR. This makes the FSR more broad-based than a document driven solely by analysis done within RBI. The FSR must necessarily do a wide-angle surveillance of financial markets and regulatory agencies, including Sebi. But RBI, as the banking regulator itself, must tread a thin line between advising what other regulators like Sebi could do to improve financial stability, while at the same time refraining from overt criticism. Also Read: The bumpy road of derivatives: Take a close look at Jane Street's potholed path to market riches The latest June 2025 report praises Sebi for its prompt action on a number of fronts. But some paragraphs are so important that they need to be quoted at length, like No. 1.38 of the report: 'The growing participation of individual investors and associated risks in the equity derivatives segment were highlighted in (the) June 2024 FSR. Since then, the SEBI has taken several important measures to strengthen this market segment, including but not limited to, rationalization of weekly index derivatives products, increase in tail risk coverage on the day of options expiry, ensuring expiry of all index derivatives products on single day of the week, increase in contract sizes, upfront collection of option premium from buyers, removal of calendar spread treatment on the expiry day and intraday monitoring of position limits. Consequently, between December 2024 and March 2025, the average daily traded value by individuals and number of individuals trading per month declined by 14.4 per cent and 12.4 per cent, respectively, compared to an increase of 47.6 per cent and 101.8 per cent, respectively, between December 2023 and March 2024." Also Read: Andy Mukherjee: Jane Street's secret sauce for Indian markets should be tested out While Sebi certainly deserves to be commended for its corrective actions, why allow weekly index derivatives at all, and especially open to retail participation? These complex financial instruments might be comprehended by enough individuals in New York or London to give depth to those derivatives markets, but here in India, do we really have enough individuals who know what they are plunging into? Most seem to be engaging in a market they don't understand, a blind gamble. It should not be surprising that mountains of losses have been suffered by individuals in the equity derivatives market. In currency markets, it makes sense to have derivatives, to iron out the volatility inherent in freely tradable currencies, about which we first learned from the work of Rudiger Dornbusch. But in equity markets, do weekly index derivatives do anything to reduce volatility? Do they not actually enhance volatility? Surely, we can have long-term equity futures (a horizon of one year or more) without weekly derivatives. Also Read: Jane Street: Gaming an outdated system is not necessarily illegal in India If, as the Sebi report of 2024 reported, the majority of losses are suffered by young participants from small towns, it is no surprise that real growth in the Indian economy is being held back by sluggish consumer demand. Equity derivatives, with that kind of participation, are a self-inflicted wound to the real economy. They distort choices among young earners in small-town India. After the seminal work of Daniel Kahneman, these kinds of policy mistakes should not have been made. Purchasing power has been diverted from current consumption, which could then have kick-started real investment by the domestic manufacturing sector. The Bank Nifty index covered a very small number of stocks and was therefore particularly vulnerable to manipulation. But the case for banning all weekly index derivatives is strong. Particularly at a time of falling interest rates, those options will become even more attractive. Equity markets are meant to encourage informed risk taking, not misinformed plunges into short-term derivatives of the kind still on offer on Indian exchanges. The author is an economist.
Mint
09-07-2025
- Business
- Mint
Sebi proposes broadening Credit Rating Agencies' mandate amid regulatory gaps
The Securities and Exchange Board of India (Sebi) has issued a proposal to clarify and expand the scope of activities that Credit Rating Agencies (CRAs) in India can undertake, especially in areas regulated by other financial sector authorities. The proposals are open for public comment till 30 July. Currently, Sebi's rules restrict CRAs to rating securities that are listed or proposed to be listed on recognized stock exchanges. However, CRAs are not barred from rating other financial products if permitted by guidelines from other financial sector regulators (FSRs) like the Reserve Bank of India (RBI) or the Insurance Regulatory and Development Authority (IRDA). The industry pointed out a regulatory gap: financial products under other FSRs lack specific rating guidelines. This has led to confusion about whether CRAs can rate such products, such as unlisted securities. Sebi's new consultation paper seeks to address this ambiguity, responding to feedback from industry stakeholders who believe that allowing CRAs to rate a wider range of products would bring synergies and fill an important gap in the market. Sebi is considering allowing CRAs to rate financial instruments under the jurisdiction of other FSRs, even if those regulators have not issued explicit rating guidelines. However, this expanded role comes with strict conditions designed to protect investors and ensure transparency. CRAs must ensure that the existing non-Sebi-regulated activities are transferred to a separate business unit (SBU) within six months of the new rules coming into effect. Each SBU must have its own grievance redressal mechanism, separate from that for Sebi-regulated activities. SBUs must maintain their own records and employ staff distinct from those handling Sebi-regulated work. Staff movement across the Chinese Wall is allowed only with proper board-approved procedures. The minimum net worth required for a CRA under Sebi regulations must be protected from any risks arising out of non-Sebi regulated activities. CRAs must clearly disclose all non-Sebi regulated activities on their website and in related rating reports, along with a disclaimer that Sebi's investor protection mechanisms do not apply. Market participants, investors and other stakeholders have until 30 July to share their views.
The Hindu
30-06-2025
- Business
- The Hindu
Indian economy remains a key driver of global growth: RBI report
Despite an uncertain and challenging global economic backdrop, the Indian economy remains a key driver of global growth, underpinned by sound macroeconomic fundamentals and prudent macroeconomic policies, the Reserve Bank of India (RBI) said in its half-yearly publication, the Financial Stability Report (FSR), which was released on Monday. Sanjay Malhotra, RBI Governor in the foreword said, 'Growth momentum is buoyed by strong domestic growth drivers, sound macroeconomic fundamentals and prudent policies.' 'Nonetheless, external spillovers and weather-related events could pose downside risks to growth. The outlook for inflation, on the other hand, is benign and there is greater confidence in the durable alignment of inflation with the Reserve Bank's target,' he said. 'The resilience of the domestic financial system is continuously improving, bolstered by strong capital buffers, low non-performing loans and robust profitability,' he said. 'Results of stress tests reaffirm the strength of the banking and non-banking sectors with capital levels projected to remain well above the regulatory minimum even under adverse shock scenarios. The healthy balance sheets of corporates, banks and non-bank financial companies (NBFCs) augur well for the economy,' he added. As per the FSR, financial conditions have eased, supported by an accommodative monetary policy and low volatility in the financial markets. The strength of the corporate balance sheets also lent support to overall macroeconomic stability, it said. 'The soundness and resilience of scheduled commercial banks (SCBs) were bolstered by robust capital buffers, multi-decadal low non-performing loans ratio and strong earnings, according to the FSR. Stating that results of macro stress tests had affirm that most Scheduled Commercial Banks had adequate capital buffers relative to the regulatory minimum even under adverse stress scenarios, it said stress tests also validated the resilience of mutual funds and clearing corporations. 'Non-banking financial companies (NBFCs) remain healthy with sizable capital buffers, robust earnings and improving asset quality. The consolidated solvency ratio of the insurance sector also remains above the minimum threshold limit,' it said. According to the latest round of the Reserve Bank's systemic risk survey (SRS) conducted in May 2025, all major risk groups remain in the 'medium risk' category. Respondents remained optimistic about the soundness of the domestic financial system, with 92% expressing higher or similar level of confidence in the Indian financial system. Geopolitical conflicts, capital outflows and reciprocal tariff/trade slowdown were identified as major near-term risks to domestic financial stability as per the FSR. 'Risks emanating from global spillovers and escalation in geopolitical tensions and policy uncertainties remain a key concern,' the FSR has flagged. 'Rising global public debt has been a recurring issue highlighted in recent FSRs and it remains a key concern, especially in the context of elevated uncertainty,' it added.
Yahoo
20-05-2025
- Business
- Yahoo
Demotech, Inc. to Review Property, Casualty, Life, Health, and Title Insurance Operating Results
COLUMBUS, Ohio, May 20, 2025 /PRNewswire/ -- Join Demotech, Inc. for a review of the operating results of 2024, which will include a comparison and contrast to prior period results. Registration is complementary and can be found at Each session will focus on an industry sector, reviewing and discussing the latest several years of public, market information. Historical key metrics including liquidity, leverage, and high-risk assets will be discussed. Emerging and pertinent topics including catastrophe reinsurance, technology and claims litigation, longevity risk, annuity sales, economic factors impacting title insurance, and other sector specific topics will also be featured. Registrants will receive presentation materials appropriate for internal reviews, comparison and discussions. Register at Joseph Petrelli, President and Co-founder, Demotech noted that "Our long-tenured, credentialed staff has prepared informative and timely presentations of the public financial information that shapes industry results. We look forward to seeing you next week. Register for one or for all of these sessions." May 27 P&C Industry Highlights May 28 Life and Health Industry Highlights May 29 Title Insurance Industry Highlights About Demotech, in 1985, Demotech, Inc. is a financial analysis firm located in Columbus, Ohio. Demotech has served the insurance industry by providing objective and independent Financial Stability Ratings® (FSRs) for Property & Casualty insurance companies, Life & Health insurance companies, and Title underwriters, among others. As the first company to have its rating process formally reviewed and accepted by Fannie Mae, Freddie Mac, and HUD, Demotech has been leveling the playing field by offering FSRs to insurers of all sizes. As of July 11, 2022, Demotech is registered with the U.S. Securities and Exchange Commission (SEC) as a nationally recognized statistical rating organization (NRSRO) in the class of ratings for insurance companies. Visit for additional information. View original content to download multimedia: SOURCE Demotech, Inc. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
