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SEBI UPDATE

Capital market regulator SEBI is seeking major changes to the structure of equity trading in India, evidently driven by the government’s recent realisation that it may be losing chunks of tax revenues due to a high concentration of equity trading volumes in the derivative segment.
Alarming rise
SEBI may soon announce measures to boost cash equity volumes and curb excessive derivative speculation, two sources close to the regulator told BusinessLine.
India’s emergence as the second-most speculative equity market globally — due to derivative trading — after South Korea, has rattled the government and SEBI.
A recent study showed that the ratio of equity derivative turnover to cash segment turnover stood at 15.2:1. That is, more than 15 trades in derivatives were being conducted for every cash market trade.
Sources say the fact that derivative trading was way higher than cash was causing heartburn in the Prime Minister’s Office and the Finance Ministry as the government derives a lion’s share of taxes from the latter segment.
The average monthly derivatives-to-cash-turnover ratio jumped to 18.6:1 in April and touched a peak of 20.2:1 in May, something which may impact Securities Transaction Tax (STT) collections.
Directly proportional
Tax collection trends suggest that any surge in cash volumes could see a manifold push in STT collection.
For instance, data shows that 67 per cent of the ₹7,350-crore STT collected during financial year 2015-16 came from the cash segment.
The trend has been similar for many previous years.
The cash segment has an average contribution of over 60 per cent in the government

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