India regulator proposes curbs on derivative-linked share moves

India’s market regulator proposed measures to contain extreme price movements in shares on which futures and options trade, including longer trading suspensions and restricting price movements.

The Securities and Exchange Board of India (SEBI) proposed in a consultation paper late on Sunday that if a share in the futures and options segment falls or rises by 10 per cent a day, trading would be suspended for an hour, up from the current 15 minutes, and then allowed to move only a further two per cent, down from the current five per cent.

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. The group collectively lost more than $100 billion in market value soon after the Hindenburg report was published.

If shares are flagged for additional surveillance and monitoring should there be a daily limit for price moves, the regulator said.

“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.