Coming down hard at futures and options (F&O) traders, Ashwani Bhatia, whole time member of the Securities and Exchange Board of India (SEBI), on Tuesday warned investors against chasing quick returns and turning the high-risk (F&O) trading into a ‘national pastime’.
“F&O cannot be a national pastime. We need to do serious investing and investors should participate in wealth that is being created in the country through pooled vehicles like mutual funds, or directly,” said the SEBI official at the 14th Morningstar Investment Conference.
India accounts for more than 50% of F&O volumes globally, but “this is a crown we do not wish to wear”, he said.
Bhatia’s comments come at a time when traders are protesting the series of regulatory changes SEBI has recently implemented to curb the rising participation of retail investors and punting of household savings.
The SEBI official warned retail investors against the risk of making heavy losses, pointing out that their odds are terrible, especially when competing with institutional players.
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Retail investors have consistently been losing money in the derivatives market, with 93% of them incurring an average loss of Rs 2 lakh. The combined net loss stood at Rs 1.81 trillion during the last three financial years (FY22-FY24), according to the SEBI’s latest study.
Bhatia advised first-time retail investors to enter the stock market through the mutual fund route or via direct investing, instead of F&O trading.
“This is becoming systemic. We need to become prosperous and cautious. SEBI has tightened margins in F&O and this will lead to a more cautious approach. This will lead to a more orderly market. To shield investors, measures were also taken to make F&O trading expensive,” the official said.
The six measures, which are set to be implemented by SEBI in a staggered manner from November 20, include higher contract sizes, rationalisation of weekly expiries and a 2% increase in extraordinary loss margin on all short options contracts on expiry day.
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