SEBI's new move to cut retailers participation in F&O!

[headstrong007]

SEBI has something very dangerous idea of ‘concentration margin,’ for High Volume traders (with high trading capital) also. No one can trade freely. Even pro traders can't increase position size rapidly when risk-reward favors!
Unfortunately, SEBI doesn't know anything about the trading, just killing the market structure.

Only big traders and pro traders usually trade on extreme positions (swing tops and swing bottoms usually formed by the actions of pro traders). Pro traders supply the much-needed liquidity near the market top or bottom when most of the general traders/investors watch from the sideline for confirmation.

Pro traders come first to take opposite positions or start booking profits of shorts. When everyone is fearful of catching a falling knife (buy at low), it's the pro traders who start booking the profits from their short near the supports which stop the market from free falling. Now with concentration margin market will not get enough liquidity at the bottom for a strong bounce back.

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This report was published few months ago.

SEBI mulls ‘concentration margin’ in derivatives

https://www.thehindu.com/business/m...ion-margin-in-derivatives/article23394383.ece


Traders with a very high or significant exposure to commodity and equity derivatives market may soon have to pay a higher margin compared with other traders as the Securities and Exchange Board of India (SEBI) is planning to create a structured framework for levying a ‘concentration margin,’ according to a person familiar with the development.

Simply put, a concentration margin would be levied on individuals and institutions whose exposure account for a major chunk of the total exposure in that respective equity or commodity derivative contract.

 

[sridhga]

I lived for some time in Gujarat and, I do know that many Gujaratis are market traders, mostly part-time. Our Prime Minister is from Gujarat. He does have an understanding of business and trade. He also has experience in handling and understanding of employment matters. Why are they killing trading and broking businesses right under his watch? Haven't Gujaratis voted him to power? Does he not seek Gujarati votes for 2019?

I am not a political person. I do not take political sides. I have respect for our Prime Minister, and, I do believe that he is a sincere man. I am just trying to understand the underlying dynamics.

 

[headstrong007]

The following foreign documentary video was posted in another forum, recorded Bombay Stock Exchange in 80's (probably).

I saw they said the Ultimate Truth in the middle:-

" Indians: Rich and Poor are Mad about The Share Market. "

I can definitely say, SEBI & Govt (Finance Ministry) don't have the power to shutdown the door of the Stock Market for small retail investors/traders with very less income and the younger generation who can't show proper income or net worth.
In the long run, the idea will fail miserably. It'll just encourage Dabba Trading for sure.

 

[augubhai]

It concerns only individuals or also companies? IF companies arent affected would it be a way to start a LLC and trade on it?

Anyone given thought to registering an offshore company for the purpose of trading. In many countries. you have lower taxation + access to global markets.

 

[TraderGYO]

Anyone given thought to registering an offshore company for the purpose of trading. In many countries. you have lower taxation + access to global markets.

Problem is (probably) sending money outside for trading related purposes. You can be clever but it can be argued in court that you are laundering money.( This is what I remember reading from tradingqna forum. Check to verify kindly.)

 

[augubhai]

Problem is probably sending money outside for trading related purposes. You can be clever but it can be argued in court that you are laundering money.( This is what I remember reading from tradingqna forum. Check to verify kindly.)

If you can show that you intend to run/do a business, you can get sponsorship and work permit also. Think Singapore/Dubai. Legal business, nothing shady. I am not even going into Thailand, Panama, Mauritius, etc.

 

[TraderGYO]

If you can show that you intend to run/do a business, you can get sponsorship and work permit also. Think Singapore/Dubai. Legal business, nothing shady. I am not even going into Thailand, Panama, Mauritius, etc.

If the reserve bank forbids to remit money for margin trading purposes then it is just not possible. Kindly check FEMA regulations.
Better to look into other trading friendly citizenships than this offshore company approach.

 

[cinderblock]

If you have the resources to set up a business in a foreign country, wouldn't it be just easier to register yourself as a HNI here? - if you wish to trade the Indian markets and escape regulations meant for retail.

 

[afin]

The most ironical thing here is that, as far as I know, most of us have started trading to enhance our net worth

The best of the worst situation at the moment is to hope for SEBI to not implement these net worth related restrictions until Dec atleast, although I would highly doubt that to happen.

 

[Novice30]

Concentration margin seems like a good idea, will keep big traders like Ashwani Gujral in check, which will go a long way in reducing liquidity to a level which SEBI finds comfortable.

Anyways, whatever may be the new rules, SEBI should declare them fast, can't keep a sword hanging on traders for too long.