Sebi to release discussion paper on curbing retail speculation in F&O trading

livemint.com:

₹295.36 trillion). Data on NSE, the world’s largest equity derivatives marketplace, shows notional turnover of equity derivatives jumped 23-fold, to ₹79,928 trillion in FY24 from ₹3,445 trillion in FY20. Around 98% of this notional turnover is accounted for by index options alone.

Premium turnover, or the actual traded turnover of index options, has risen 12.77 times to ₹138 trillion over the same period. Concerns about mounting retail losses cropped up two years ago, when Sebi mandated that brokers upload disclaimers on their broking apps and websites warning that nine out of 10 derivatives traders lose money, net trading loss is close to ₹50,000; they also spent 28% more of net trading losses as transaction costs, etc. This has forced Sebi to think anew on measures to curb retail exuberance in F&O.

The counterparty to retail tends to be the technology savvier and deep-pocketed proprietary (pro) trader, a broker trading on his own account. While retail client market share in premium turnover of index options stood at 35.5% in the fiscal year through May (FY25), up 140 basis points from the corresponding period of the previous fiscal year, proprietary traders’ share fell 315 bps to 46.1% over the same period, show NSE data. If the regulator decides to accept the panel recommendations including increase in lot size, increasing price intervals between option strikes and having a single product expiry a week against the current practice of having five products could impact turnover by as much as a fifth, according to Sahoo.