Problem of plenty

Derivatives volumes can increase risks

The Financial Stability and Development Council is reportedly considering setting up a panel to study the potential risks arising from a surge in derivatives (futures and options, or F&O) trading. The rapid growth in F&O volumes, coupled with an increase in retail participation, may have led to increased systemic risks and a possibility of contagion if there are high levels of volatility. Although details are sparse, the panel would possibly focus on retail derivatives traders and their possible sources of margin funding. It would examine the possibility that individuals are using personal loans to fund margins for this highly leveraged