India’s regulator suggests limits on share movements linked to derivatives.

SEBI Proposes Measures to Contain Extreme Price Movements in Shares

Introduction

The Securities and Exchange Board of India (SEBI) has proposed measures to contain extreme price movements in shares on which futures and options trade. The proposed restrictions follow a free fall this year in shares of billionaire Gautam Adani’s group companies after U.S.-based short seller Hindenburg Research raised governance concerns in January.

Proposed Measures

SEBI proposed in a consultation paper late on Sunday that if a share in the futures and options segment falls or rises by 10% a day, trading would be suspended for an hour, up from the current 15 minutes, and then allowed to move only a further 2%, down from the current 5%. If shares are flagged for additional surveillance and monitoring should there be a daily limit for price moves, the regulator said.

Why the Measures are Necessary

“From the perspective of market stability, risk management and protecting the interest of investors, it is desirable to have safeguards against such extreme price movements,” SEBI said.

Conclusion

SEBI’s proposed measures are aimed at protecting investors and ensuring market stability. The regulator’s move comes after a series of extreme price movements in shares on which futures and options trade. The proposed measures include longer trading suspensions and restricting price movements.