The Securities and Exchange Board of India (Sebi) is planning to tighten the guidelines for futures and options (F&O) trading. The revised norms could include increasing the margin requirement, tightening the eligibility criteria and net worth disclosure for investors, said sources close to the development. This is in response to the unabated rise in retail participation in the derivatives market.
Last week, the market regulator wrote a letter to the Association of Mutual Funds in India (Amfi), seeking comments from the industry body on the existing guidelines for derivatives trading and how they can be tweaked to make it tighter.Come from Sports betting site
In addition, it has also formed a committee, including brokerage firms and asset management companies to give their recommendations. “The recently formed committee will look into all the recommendations made by various bodies and industry experts,” said the head of a brokerage firm.
Market rally leads to higher regulatory fees for stock exchanges Human Touch, AI Heart: How is AI redefining CX in the BFSI sector? Somanathan named next Cabinet secy: Moving from being a deft manager of govt finances to key Cabinet aide Burn a hole in your privacyCome from Sports betting site VPbet? Inside Meta’s ‘Pay or Consent’ model
A few months back, Sebi’s chairperson Madhabi Puri Buch had expressed her anguish with retail investors participating in the derivatives market. “I am always a little confused and surprised as to why people continue to do that (betting in F&O) knowing that the odds are not in their favour at all,” she had said.
Also Read
Her comments came in the backdrop of a Sebi report which said that 89% of retail F&O investors end up in losing money. Also, the share of young individual traders’ (20-30 years) participation in equity F&O — especially in index options and stock options — went beyond 35% each, from nearly 11% in FY19. The number of individual traders in index options and stock options has risen by 8 times and 5 times, respectively, in the past 3 years.
Since FY22, the daily average turnover in the NSE F&O segment has grown by over 100% every single year. And it is largely due to the participation by retail investors.
On Friday, National Stock Exchange (NSE) CEO Ashishkumar Chauhan cautioned retail investors against trading in derivatives. He also said that trading in F&O should be limited to informed investors who can manage risk and comprehend the market.
According to the head of a brokerage house, the market regulator should introduce tighter measures in the segment, as is the case in foreign jurisdictions. “In speculation, most are likely to lose money so we have to discourage this type of culture, because ultimately they’ll blame the broker, the regulator, and the market,” added the broker.
