Unfettered trading in stock futures will be curbed

Strain the sod as much as the sheet

Mumbai: Market regulator Securities and Exchange Board of India (SEBI) is considering linking the risk taken by investors in the stock market with their income and net worth. This is being considered for the safety of the assets of investors who are risking their capital in the pursuit of overnight earnings by watching the stock market rally.

Investors dealing in equity derivatives can take risk only according to their income and assets, so that retail investors do not have to risk their entire capital.

With the Indian stock markets currently trading at their all-time highs, interest from retail investors is also increasing. It has been seen many times in the past that when the market crashes from highs, the biggest losers are small investors playing derivatives. In the three years ending March 2023, the participation of retail investors in equity derivatives in the Indian stock market has increased by over five hundred percent. A Sebi study earlier found that nine out of ten retail traders, most of whom were young traders, made an average loss of Rs 1.10 lakh last financial year.

Sebi has earlier asked brokerage houses to clearly display the risks faced by trading in derivatives on their websites, but Sebi is now considering taking tougher measures in view of the rising participation, Sebi sources said.

A move is being considered to allow derivatives traders to risk a certain percentage of their income and assets. For this, SEBI wants to get the votes of all the stakeholders by issuing a special discussion paper.

Sources said that stockbrokers will be told to provide information on the income and assets of retail traders and it is also being considered to make them responsible for this. Earlier in 2017, SEBI had presented such a proposal but it could not be implemented as the stock brokers did not agree. Sebi has become active again on this issue after the recent loss reports.

In June, the average daily turnover in the equity derivatives market was Rs 259 lakh crore. In May, this figure was seen at Rs 252 lakh crore. The F&O segment saw its turnover increase for the eighth consecutive month in June.