Are concerns over F&O retail activity overblown?
retail trader participation in stock futures and options overblown? Exchanges and stock brokers may have a reason to believe so. According to NSE data, the value of trades by retail investors who traded less than ₹10 lakh in a month as a percentage of total equity F&O turnover of ₹46.25 lakh crore in March was 0.6%.
Options turnover in the total F&O turnover has been calculated on the basis of the premium and not the strike value (which is used by NSE and BSE to calculate their turnover officially).
Premium is the price that traders pay to buy an option or receive by selling an option. In comparison, the NSE data showed retail investors' activity in the cash segment (shares) is higher at 2.8% of the total turnover of ₹18.57 lakh crore in March.
Brokers contend that though overall retail activity in equity futures & options has grown in recent years, it may not be alarming when compared to the overall turnover.
«The reason for overall volumes in derivatives being very high compared to cash market can be assigned to high-frequency trades and proprietary trades of brokers aided by a large number of professional dealers known as arbitrageurs,» said Vinod Goyal, national president of the Association of National Exchanges Members of India (ANMI).
The debate around the growing retail activity in F&O surfaced after Finance Minister Nirmala Sitharaman recently said, «Any unchecked explosion in retail trading of futures & options can create future challenges, not just for the markets, but for investor sentiment and
