Risky options

Sebi should continue to educate retail investors

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The regulatory action against Jane Street has brought renewed attention to the equity derivatives market. It may be premature to comment on the Jane Street affair since there is a fine line between manipulation as alleged, and price arbitrage as Jane Street claims. However, it is clear that there are imbalances between the cash and derivatives segments of the equities market, which is what hedge funds and sophisticated traders look to exploit. As a senior official of the Securities and Exchange Board of India (Sebi) recently pointed out, the nominal turnover of the derivatives market was 350 times that of the cash market and this was not a normal situation.

While India's market capitalisation makes it the fifth-largest stock market by size, its derivatives market is the world's largest by volume.