Sebi will strengthen regulations on financial influencers and stock derivatives on Thursday

The sources, who wished to remain anonymous because they are not authorized to speak to the media, said that the Securities and Exchange Board of India's board meeting on Thursday is expected to discuss these measures, which are intended to prevent market manipulation in the wake of the sharp increase in the trading of complex financial instruments.

Sebi will strengthen regulations on financial influencers and stock derivatives on Thursday.

According to two people with firsthand knowledge of the situation, India's markets regulator is expected to tighten requirements for equities to be qualified for trading in derivatives and to request that brokers and mutual funds cease using unregistered financial influencers in their marketing activities.

In an effort to filter out derivatives associated with illiquid equities, the markets regulator said earlier this month in a discussion paper that stock derivatives should have enough liquidity and trading interest from market players.

In 2023–24, the notional value of options traded in India more than quadrupled to $907.09 trillion from the previous year. Options are derivative contracts that provide investors the opportunity to purchase or sell a securities at a predetermined price at a future time.

In India, index option contracts are used for the majority of options trading. According to Reuters earlier this month, the agency is examining a number of technical adjustments even though it hasn't yet taken any action to control index options.

Influencers offering financial advice on social media platforms proliferated as a result of the COVID-19 pandemic's spike in retail investors' engagement in the stock markets.

The markets regulator has recommended that brokers and mutual funds cease their relationships with unregistered influencers in order to prevent financial influencers from misleading investors.

More generally, according to one of the individuals, the regulator assembled a panel this week consisting of exchanges, brokers, and mutual funds "to suggest any additional changes needed for eliminating risk of manipulation as well as ensure retail investors are protected regarding risks in options contracts."

The markets regulator's board will also review amending the delisting guidelines on Thursday in an effort to facilitate businesses' removal from stock exchanges.