Sebi's F&O restrictions likely to boost dabba trading in Indian markets

Regulator has proposed physical settlement of contracts in place of cash settlements

The decision of the Securities and Exchange Board of India (Sebi) to tighten the derivatives framework could provide an impetus to ‘dabba trading’ — an unofficial parallel market.
 
According to market participants, the concept of ‘product suitability’ and physical settlement can see many proprietary traders and wealthy investors shift to dabba trading. The move could revive the activity in the grey market, adversely hit after demonetisation.
 
Dabba trading occurs in a manner similar to a stock exchange, without any regulatory oversight or tax burden. As these are unofficial trades, investors don’t have to pay the securities transaction tax