SEBI to introduce stricter regulations on F&O trading soon
What's the story
The Securities and Exchange Board of India (SEBI) is gearing up to drop a draft circular with tougher rules for derivatives trading. As per Moneycontrol, these proposed measures won't need the board's nod. SEBI hasn't changed its index-derivatives rules after its board meeting on Monday. But, it is thinking about a new framework based on suggestions from a Working Committee on Futures and Options. This committee was set up to tackle the issue of excessive speculation in the derivative market.
Market impact
SEBI's response to F&O market losses
The move comes in response to significant losses incurred by individual traders in the futures and options (F&O) market. A recent SEBI study revealed that these traders have suffered a staggering ₹1.8 lakh crore in total losses over the past three fiscal years. This figure represents an average loss of ₹2 lakh for nearly 93% of more than one crore investors, or nine out of every 10 traders.
Trader losses
Individual traders bear the brunt of F&O market losses
According to SEBI's data, most individual traders and proprietorship firms are consistently losing money in India's booming F&O market. The regulator estimates that around 92.5 lakh such participants lost about ₹51,700 crore in FY23 alone, excluding statutory transaction costs. This trend highlights the need for stricter regulations in derivatives trading to protect investors from significant financial setbacks.