Do Position Limits in Single Stock Derivatives Benefit Equity Markets?

The Indian Stock market undoubtedly experienced tremendous growth in the trading activity in the last twenty-five years. The Derivatives segment of the market began its operations with the launch of Index Futures by the National Stock exchange of India (NSE) in the year 2000. The Derivatives, as a financial product, derives its value from an underlying asset and is primarily designed to reduce the risk which businesses and individuals face due to the fluctuations in the asset prices. It helps individuals and companies to undertake risky projects with high returns and use derivatives as a tool to hedge risk, which can potentially lead to wealth creation. The popular instruments of equity derivatives market are- Forward, Future, Option, and swaps. This paper presents the legal framework and regulatory aspects by the market regulator Securities and Exchange Board of India (SEBI) involving derivatives that is based on the recommendations of the L.C. Gupta Committee. SEBI laid its objectives in regulating derivative markets to ensure transparent trading environment, safety, and integrity.

Purpose Small and ignorant investors have had very unpleasant experiences in the stock market. They should be alert and have proper knowledge and understanding of the various problems that can arise in their dealings and how these can be resolved. This paper aims to analyse the investors’ probable solutions to their investment-related problems by using descriptives and factor analysis technique. Only Securities and Exchange Board of India (SEBI) can ensure a free and fair market and take India into league of major global capital markets in the next round of reforms. Design/methodology/approach By personally visiting the offices of the stockbrokers, 1,000 questionnaires have been distributed among retail equity investors of Punjab, i.e. Amritsar, Jalandhar, Ludhiana and Mohali. Stockbrokers have been selected using simple random sampling technique because of their large number. In total, 373 questionnaires have been filled up by the respondents, and 45 questionnaires have been found to be incomplete and thus have been excluded from the analysis. Remaining 328 questionnaires have been used for the analysis. The objective of the research is to study the investors’ probable solutions to their investment-related problems. The collected data have been analysed using descriptives and factor analysis technique. Findings It has been found that 24.7 per cent retail equity investors have filed complaints while dealing in the securities market; on the other hand, 75.3 per cent retail equity investors have not filed any complaint neither against the company nor against the intermediaries. It has been found that the authorities have taken 12-90 days and even four-five months in providing first reply to their complainants. Moreover, it has been found that in some of the cases, SEBI has written to the concerned companies to resolve the complaints, and some issues have been still pending with SEBI. It has been revealed that SEBI has taken quite long time to resolve the complaints, and equity investors have not been satisfied with the decisions of the SEBI. This study has further highlighted the importance of variables considered by investors as probable solutions to their problems while dealing with securities. The highest mean score has been found for the variable grievance redressal mechanism has been slow, followed by investors have been exploited by the malpractices of companies, merchant bankers and auditors, stronger regulations have been required to strengthen investor protection, investor has yet not educated enough to discriminate between good and not-so-good scrips, etc. These 22 variables measuring the construct of investors’ probable solutions to their problems have been analysed with the help of factor analysis. Six factors have been identified with the help of factor analysis, i.e. stability measures for stock market, investor awareness and education norms, measures to impart knowledge to investors, measures to protect investor rights, audit of companies and investor grievance redressal, and these factors have together explained 68.441 per cent of the variance in data. Research limitations/implications Based on the study done by the researcher, the following suggestions are identified for further research. As the present study is at a state level, it could be extended to national level. The impact of retail investment in capital market may be studied in view of rural investors. The study may further be carried out to analyse the impact of reforms on the functioning of stock exchanges. A study on the awareness of women investors about retail investment pattern could be attempted. Implications of internet stock trading in India can be taken up for study. Impact of technological innovation in capital markets can be studied. Practical implications This study would be of great use for investors who make decisions regarding investment. This study will help policymakers in formulating strategies and will also help credit rating agencies in rating the investment instruments. Social implications This study is of great help for investors and SEBI. This study guides the investors regarding various laws that have been formulated for their protection and guides the SEBI in making strict regulations for the protection of the investors. Originality/value This task is 100 per cent original and some authors have been quoted.

Learning outcomes After reading the case, the students shall be able to explain the concept of insider trading and differentiate between illegal insider trading and legal insider trading, business ethics, financial institutions, financial markets and accounting; to interpret the legal framework for prevention of insider trading; to identify the role and significance of the market regulator, Securities and Exchange Board of India (SEBI), in detecting financial crimes such as insider trading; to demonstrate the association between information, stock trading and stock prices within the framework of efficient markets; and to appraise the ethical dilemma in a family-owned firm, where the family members of the promoter group are alleged to have indulged in a financial crime. Case overview/synopsis The case revolves around allegations of insider trading against the promoter and the promoter group of the family owned and controlled firm, Lux Industries Limited. On January 24, 2022, the SEBI, the regulator of securities markets in India, accused Udit Todi, the Executive Director of Lux Industries Limited, of engaging in insider trading through a chain of 14 connected parties. Udit Todi was also the son of the Managing Director, Pradip Kumar Todi, and the nephew of the Executive Chairman, Ashok Kumar Todi. In its interim order, SEBI alleged a breach of insider trading regulations by a group of 14 connected entities that had built up long positions starting from May 21, 2021, before the quarterly financial results (Q4) and the annual results of the financial year (FY) 2021 in the equity shares of Lux Industries Limited, with its registered office in Kolkata, India, were announced. Subsequently, they squared off the long positions to make a profit of ₹29.43m. To restore the confidence of the investors, the Executive Chairman, Ashok Kumar Todi, needed to review the matter expeditiously and impartially. Taking into consideration the family ties of the accused, it was not going to be an easy task, yet, it had to be done. The case highlights the role of the regulator, SEBI, in unearthing financial frauds such as insider trading in an emerging market such as India. Complexity academic level Postgraduate programs in management, Executive education programs. Supplementary materials Teaching notes are available for educators only. Subject code CSS 1: Accounting and Finance

PurposeThis study aims to determine experimentally factors affecting the satisfaction of retail stock investors with various investor protection regulatory measures implemented by the Government of India and Securities and Exchange Board of India (SEBI). Also, an effort has been made to gauge the level of satisfaction of retail equities investors with the laws and guidelines developed by the Indian Government and SEBI for their invested funds.Design/methodology/approachTo accomplish the study’s goals, a well-structured questionnaire was created with the help of a literature review, and copies of it were filled by Punjabi retail equities investors with the aid of stockbrokers, i.e. intermediaries. Amritsar, Jalandhar, Ludhiana and Mohali-area intermediaries were chosen using a random selection procedure. Xerox copies of the questionnaire were given to the intermediaries, who were then asked to collect responses from their clients. Some intermediaries requested the researcher to sit in their offices to collect responses from their clients. Only 373 questionnaires out of 1,000 questionnaires that were provided had been received back. Only 328 copies were correctly filled by the equity investors. To conduct the analysis, 328 copies, which were fully completed, were used as data. The appropriate approaches, such as descriptives, factor analysis and ordinal regression analysis, were used to study the data.FindingsWith the aid of factor analysis, four factors have been identified that influence investors’ satisfaction with various investor protection regulatory measures implemented by government and SEBI regulations, including regulations addressing primary and secondary market dealings, rules for investor awareness and protection, rules to prevent company malpractices and laws for corporate governance and investor protection. The impact of these four components on investor satisfaction has been investigated using ordinal regression analysis. The pseudo-R-square statistics for the ordinal regression model demonstrated the model’s capacity for the explanation. The findings suggested that a significant amount of the overall satisfaction score about the various investor protection measures implemented by the government/SEBI has been explained by the regression model.Research limitations/implicationsA study could be conducted to analyse the perspective of various stakeholders towards the disclosures made and norms followed by corporate houses. The current study may be expanded to cover the entire nation because it is only at the state level currently. It might be conceivable to examine how investments made in the retail capital market affect investors in rural areas. The influence of reforms on the functioning of stock markets could potentially be examined through another study. It could be possible to undertake a study on female investors’ knowledge about retail investment trends. The effect of digital stock trading could be examined in India. The effect of technological innovations on capital markets can be studied.Practical implicationsThis research would be extremely useful to regulators in developing policies to protect retail equities investors. Investors are required to be safeguarded and protected to deal freely in the securities market, so they should be given more freedom in terms of investor protection measures. Stock exchanges should have the potential to bring about technological advancements in trading to protect investors from any kind of financial loss. Since the government has the power to create rules and regulations to strengthen investor protection. So, this research will be extremely useful to the government.Social implicationsThis work has societal ramifications. Because when adequate rules and regulations are in place to safeguard investors, they will be able to invest freely. Companies will use capital wisely and profitably. Companies should undertake tasks towards corporate social responsibility out of profits because corporate houses are part and parcel of society only.Originality/valueMany investors may lack the necessary expertise to make sound financial judgments. They might not be aware of the entire risk-reward profile of various investment options. However, they must know various investor protection measures taken by the Government of India & Securities and Exchange Board of India (SEBI) to safeguard their interests. Investors must be well-informed on the precautions to take while dealing with market intermediaries, as well as in the stock market.

Derivatives Market has an important role to play in the economic development of a country. The objective of the study is to examine the impact of financial derivatives (futures and options) on the underlying market volatility. The paper also analyses the perception of investor about objectives of investment, investment pattern, risk, derivatives awareness level, future of derivatives market in India. Data has been collected for a period of 18 years from January 1, 1996 to February 5, 2014. Data has been collected for various indexes like CNX S&P Nifty index daily closing prices (from January 1, 1996 to February 5, 2014), Nifty Junior Index (from January 1, 1996 to February 5, 2014), Index Futures near month contracts daily closing prices from (June 12, 2000 to February 5, 2014) and S&P 500 Index (from January 1, 1996 to February 5, 2014).The questionnaire was distributed to 1000 respondents but 522 filled questionnaires were received and have been analyzed in this study. The questionnaire was subjected to reliability and expert validity.The final AR (1)-GARCH (1,1) model show that overall volatility has reduced in the spot market after the introduction of derivatives. In the model all variables are highly significant. Awareness about financial markets, experience in derivatives trading, workplace activity and return expectation are significantly associated with derivative awareness level (DAL) of respondents at 5 percent level of significance. The results of Structural Equation Modelling reveals perception of investors about future of derivatives market in India include having an investor grievance redressal mechanism which is approachable under trading hours, steps to be taken by regulators to increase investments, conducting investor training and awareness programmes, global integration will happen, derivatives market will affect growth of the economy and consolidation of exchanges is required.

This paper analyses information-based superiority of markets mainly with an objective of exploring arbitrage opportunities. It attempts to determine the lead-lag relationship between spot and futures markets in the Indian context by using high frequency price data of twelve individual stocks, observed at one-minute interval. The study applies the concept of co-integration and establishes the spot-futures relationship using Vector Error Correction Mechanism (VECM) represented by EGARCH framework. To study the price discovery process in the two markets, five lags each of one-minute resolution for nine individual stocks and four lags for the remaining three stocks are chosen. The key results of the study are given below: There is a contemporaneous and bi-directional lead-lag relationship between the spot and futures markets. A feedback mechanism of short life is functional between the two markets. Price discovery occurs in both the markets simultaneously. There exists short-term disequilibrium that could be corrected in the next period. Volatility spillover from spot market to futures market is present in such a way that a decrease in spot volatility leads to a decrease in futures volatility. Volatility shocks are asymmetric and persistent in both the markets. Spillover from futures market to spot market is not significant. Neither spot nor futures assume a considerable leading role and neither of the markets is supreme in price discovery. In the case of 33.33 per cent of spot values and 33.33 per cent of futures values, there exists short-term disequilibrium that could be corrected in the next period by decreasing the prices. Spot market volatility spills over to futures market in most of the cases (66.66 %) and a decrease in spot volatility brings about a decrease in futures volatility in 50 per cent of the cases. Spillover effect from futures to spot market is present and significant in 91.66 per cent of stocks and is more than the spillover effect from spot to futures (50% valid cases). The markets are highly integrated. Asymmetric behaviour of volatility shocks is mixed in both the markets. Asymmetric volatility is detected in 50 per cent of the cases of spot market and 58.33 per cent cases of futures market. Stocks exhibiting asymmetric volatility show more sensitivity to negative shocks. There are no cases of market becoming more volatile in response to good news.

Introducing more speculators into the market for a given commodity leads to improved risk sharing but can also change the informational content of prices. This inflicts an externality on those traders already in the market, whose ability to make inferences based on current prices will be aff ected. In some cases, the externality is negative: the entry of new s peculators lowers the informativeness of the price to existing trader s. The net result can be one of price destabilization and welfare red uction. This is true even when all agents are rational, risk-averse c ompetitors who make the best possible use of their available informat ion. Copyright 1987 by University of Chicago Press.

This study investigates the impact of recent regulatory changes introduced by the Securities and Exchange Board of India (SEBI) on retail investor participation in the Indian capital market. Focusing on a sample of 100 retail investors, the research analyses shifts in investment behaviour, trading frequency, and investor confidence before and after the 2021 regulatory amendments. The findings reveal significant increases in average monthly investment, trading frequency, and investor confidence post-regulation, highlighting the positive influence of a well-structured regulatory framework on retail investor engagement. However, the variability in responses suggests that the effects of these regulations are not uniformly experienced, indicating a need for more targeted and nuanced regulatory strategies. The study concludes with recommendations for future regulatory initiatives, emphasizing the importance of financial literacy programs, continuous monitoring of regulatory effectiveness, and tailored approaches to address the diverse profiles of retail investors.

Strategic and financial investors often look to grow their asset-base by investing in jurisdictions having the best potential for economic development. In most instances they prefer countries that offer adequate protection for their investments and, certainty and clarity in relation thereto. Investors look for legal transparency and precision, and require the existence of mechanisms in a country’s commercial law that safeguard their interests, regardless of the size of such investor’s holding in a company.A significant number of India’s most successful companies today continue to be closely held and controlled by a select few of India’s most powerful business families. While such companies do invite foreign stakeholders to invest as minority shareholders, the companies expect the day-to-day management to be left with their Indian controllers. Historically, poorly drafted and disjointed Indian corporate and securities law has been one of the major causes of scarce foreign investment into India. In the aftermath of the global economic slowdown caused by the financial crisis of 2008, both the cross-border and domestic mergers and acquisitions (‘M&A’) spaces in India have witnessed relatively lean periods. However, after a somewhat dormant phase, recent times have seen a slew of policy and regulatory changes brought about by the Indian Government with myriad objectives and goals. Several of these modifications in the law suggest an overarching theme of improving the protection afforded to foreign investors in India and the creation of an M&A transactional atmosphere that is, in general, more conducive to augmenting inward fund flow and assisting in India’s inorganic growth. This article bases itself on a contemporary understanding of the expectations of foreign strategic and financial investor protection in India. It selects some of the most far reaching alterations in this area of Indian commercial law, brought about by the Indian Parliament, the Reserve Bank of India (RBI), the Ministry of Corporate Affairs (MCA) and the Securities and Exchange Board of India (SEBI). Constraints of space do not permit all of the changes introduced in recent times to be captured and analysed comprehensively. However, an attempt has been made to choose certain interrelated themes most favoured by foreign investors, and, according to the author, are likely to have the greatest impact on foreign investor protection in the coming years. The article tries to offer a critical analysis of whether or not the selected initiatives are likely to be noteworthy catalysts in boosting investor confidence and bolstering M&A in India.The article focuses on two perspectives: (a) expectations in corporate governance and (b) the law relating to the need of securities regulation. Under the corporate governance perspective, the author begins with an analysis of optionality clauses and entrenchment in investor agreements, before taking a deeper look at India’s recently amended law on related party transactions. The analysis here will evaluate specifically whether the manner in which the laws are framed in these areas truly translate into enhanced protection for foreign investors. Next, the article moves on to a broader perspective of securities regulation law, where it discusses significant and wide-ranging proposals for change in India’s insider trading law and the utility attached to the newly permitted foreign listings for Indian companies. Here the author also investigates changes in Indian securities law in the context of taking listed Indian companies private. Ultimately, using these two perspectives, the article tries to make a critical evaluation of the legal implications of each of the selected investor protection reform efforts, to weigh their apparent successes and failures. The article’s thesis is that several recent changes have significant positive potential, but require thoughtful reconsideration in parts in order actually to impact investor comfort. With this in mind, it concludes by offering a normative outlook on foreign investor protection in India’s evolving corporate legal space.

Global climate change has already had observable effects on the environment. Glaciers have shrunk, ice on rivers and lakes is breaking up earlier, plant and animal ranges have shifted and trees are flowering sooner. According to Intergovernmental Panel on Climate Change the net damage cost of climate change are likely to be significant and is likely to be increase over overtime.Carbon dioxide is a big cause of global panic as its concentration has been rising alarmingly in the atmosphere. On the other side it has created a global carbon market also. Hence with growing concerns owing to Kyoto Protocol amongst countries to curtail pollution levels along with sustaining their economic growth, the Emission Trading (ET) industry has started actively providing support to bring down green house gas emission by allocating a monetary value and is expected to come forward as a massive market of global emission trading. The developed countries are supposed to meet certain carbon emission targets fixed by their respective governments. Conversely if they are unable to do so they have an option of buying these in the market from those companies which have surplus of them. This practice is known as carbon trading. Even for developing nations it is a very lucrative as it endow them with fiscal gains for swapping carbon credits with latest technology. This modified technology ultimately facilitates them to condense carbon emanation. In India it's trading started in Multi Commodity Exchange of India from the month of April, 2008. The main objective of the paper is to discuss information spillover in the carbon emissions derivative market in India under the VAR framework and to understand volatility spillover in the future and spot market by using bivariate E-GARCH model. The results reveal that there is a co-integrating relationship between future and spot prices of Carbon Emission Reduction (CER), traded on MCX. The error correction mechanism exhibits bi-lateral adjustments to attain equilibrium with more adjustments in future prices is seen, and to add robustness in the results of VECM, Variance Decomposition and Impulse response were also conducted. To understand the direction of causality, Granger causality test was done, the results of which show bi-lateral causality in the price pairs. The results signify that this market is informationally efficient with the lead role of spot market. Volatility dynamics also show bilateral spillover i.e. from future to spot market and vice versa. Generally, our findings demonstrate numerous imperative inferences for portfolio hedgers in creating optimal portfolio allotment, appealing in risk management and forecasting Carbon market potential volatility.

With growing concerns among nations to curb pollution levels while maintaining the growth in their economic activities, the emission trading (ET) industry has become active. As per Multi-Commodity Exchange of India, with the increasing ratification of Kyoto Protocol (KP) by countries and rising social accountability of polluting industries in the developed nations, the carbon emissions trading is likely to emerge as a multibillion-dollar market in global emissions trading. Carbon credits are a tradeable permit scheme. They provide a way to reduce greenhouse gas emissions by giving them a monetary value. Carbon Emission Reduction (CER) is treated in the derivative trading market as a commodity. In India this is new commodity to be traded in Indian derivative market. It started trading in National Commodity and Derivatives Exchange Ltd (NCDEX), India from the month of April, 2008. Background and objective of the study: The trading of Carbon credit started in NCDEX commodity market from April 2008. NCDEX is a public limited company incorporated on April 23, 2003 under the Companies Act, 1956. It obtained its Certificate for Commencement of Business on May 9, 2003. It commenced its operations on December 15, 2003 regulated by forward market commission. Since the CER trading started in the NCDEX spot and future market, it was attempted to find out a causal link between the two and also to study whether the two are co integrated. Motivation for the Study: It was also observed as per my knowledge, no study has been made in Carbon trading derivative market in India which motivated me to undertake this research work. Objective of the Study: 1. Study whether causality exists between CER spot market and CER future market and vice versa. 2. Study whether CER spot and future market are cointegrated. Research Methodology: The daily closing data of NCDEX CER spot index and NCDEX CER future index from April 10th, 2008 till March 31st, 2009 was taken. A unit route test through Phillips-Perron test was conducted at level which again showed that the data are non stationary. Granger Causality test was conducted after converting the non stationary data as stationary at first difference. Also, a Johansen co-integration test was conducted to test whether co integration exists between the two.

Derivatives are innovative financial instruments in the 21st century to help the market participants in mitigating the risk. Commodity derivatives are not new to the world, but reentered with new face into the fray. In India, derivatives are introduced at first on index and followed by securities and commodities phase wise for the betterment of the markets and the price discovery. The present study explores the association and trend between the Spot and Futures Commodity Derivatives Market in India before and during the Covid – 19 pandemic. The study uses descriptive, trend analysis and correlation analysis. The analysis done by using the MCX four major agriculture and non-agriculture commodities such as Cotton, Mentha oil, Crude oil and Natural gas spot as well as future price. Indian commodity futures market can be used as hedging tool with financial instruments for diversifying the risk during crisis period.

<p>This research offers a comprehensive analysis of the structural aspects of Initial Public Offerings (IPOs) in India, covering the period from the pre-liberalization era to the current time. The research paper examines the IPO landscape in India, a vibrant economy in Asia, by gathering a comprehensive dataset from various sources, including the Securities and Exchange Board of India (SEBI) archives, financial reports, and other pertinent sources. It analyzes the evolutionary patterns, regulatory changes, and significant events that have influenced the development of IPOs in the country. The primary findings indicate that regulatory changes, economic growth trajectories, and global financial conditions have significantly influenced initial public offerings (IPOs) volume and valuation. The research methodology involved meticulous data collection from reputable academic databases, primarily Mendeley and Scopus, spanning over five decades. This extensive dataset forms the foundation for our robust and insightful analysis. The study additionally emphasizes the significance of India's distinctive socio-economic structure, which has enabled and restricted the advancement of the capital market. By conducting a comparative analysis between India's framework and worldwide best practices, this study aims to identify areas of convergence and divergence. The paper finishes by providing policy proposals that enhance the resilience and inclusiveness of the Indian Initial Public Offering (IPO) market for a diverse range of issuers and investors.</p><p><strong> </strong></p><p><strong>JEL</strong>: O10, O16</p><p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/soc/0016/a.php" alt="Hit counter" /></p>

This study examines volatility spillover across sectoral stock indices in India, an emerging market economy, during the COVID-19 pandemic. Our research makes three key contributions: (a) incorporating range volatility measures to capture the pandemic's impact on stock market volatility, (b) providing a comparative assessment of volatility spillover across sectoral indices, and (c) identifying evidence of volatility spillover across different sectoral indices. Using daily historical open, high, low, and close price data for 11 NIFTY sectoral indices during first wave of pandemic; the findings reveal that open-to-close returns outperform close-to-close returns in forecasting sectoral stock indices, underscoring the importance of incorporating range-based volatility measures in forecasting models. Furthermore, the multivariate Range DCC model confirms significant volatility spillover across sectoral indices, highlighting the interconnectedness of Indian sectoral stock markets during crisis periods. The findings offer actionable insights for the Securities and Exchange Board of India (SEBI) to develop targeted, sectoral-level market surveillance strategies and robust risk management frameworks, ultimately enhancing the resilience of India's capital markets in post-pandemic scenarios.Copyright© 2025 The Author(s). This article is distributed under the terms of the license CC-BY 4.0., which permits any further distribution in any medium, provided the original work is properly cited.

The impact of the change in USDA announcement release procedures on agricultural commodity futures