The Securities and Exchange Board of India (Sebi) has asked market intermediaries to keep product designs in mind before selling them indiscriminately to clients. The regulator also asked brokers and market infrastructure providers to lower transaction costs to help the markets grow from the current levels.
Sebi Chairman CB Bhave said, “Products should only be sold to suitable investors.” He was referring to complex derivatives instruments, which included interest rate futures and currency futures, apart from products like the S&P 500 futures that would be available for trading shortly.
“We need to keep client appropriateness in mind. We should not sell products indiscriminately for volume,” said Bhave while delivering the keynote address. Interestingly, derivatives instruments attracted a lot of criticism in 2008 when the overall market sentiment witnessed a sharp drop. Investors, especially retail, knocked at the regulator’s door complaining against brokerages for selling them derivatives instruments they did not understand.
The Sebi chairman also stressed the importance of lowering transaction costs to make the domestic market more competitive.
