DBT Bureau
Bengaluru, 31 July 2024
The market regulator has hinted that it will come up with measures, to regulate the derivative trades in the equity market. This is largely aimed at discouraging retail traders’ participation in the future and option segment owing to huge losses incurred by them in such risky instruments.
The F&O segment has attracted lakhs of retail traders into the market, which see it as a way to earn quick money. In FY24, more than 92.50 lakh unique individuals and proprietorship firms traded in the NSE index derivatives segment. According to SEBI data, more than 85% of traders incurred losses in the last financial year, indicating the speculative nature of these instruments and the risks associated with them.
What SEBI Chairperson said?
“If Rs 50,000-60,000 crore a year is going away into losses in F&O whereas that would have been productively deployed as maybe the next IPO round, maybe mutual funds, to other productive purposes, why is that not a macro issue?,” SEBI Chief, Madhabi Puri Buch said on Tuesday.
To curb such huge loss of Rs 50,000 crore- Rs 60,000 crore, SEBI has proposed tighter regulations on derivatives to protect small investors.
What proposals SEBI is mulling over?
- Minimum contract size: Though raising the minimum contract size, the market regulator wants to create an entry barrier. In the beginning, minimum contract size is proposed to be between Rs 15-Rs 20 lakh, which will be raised to Rs 20 lakh to Rs 30 lakh after six months.
- Rationalisation in weekly index contract:
- Upfront option premium
- Increase in margin near contract expiry
- Rationalisation of strike price for options
- Removal of expiry day calendar spread benefit
- Intraday monitoring of position limits
