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

[Tejas Khoday]

Sebi seems to suggest that it does not like speculators as they do not add value to the market. They want to cut the participation on F&O as India has the second largest volume in the futures market in the world. It implies that traders should restrict themselves to the cash market.

But, what is current position in CASH market!

Cash market data shows that the only 20-30 percent delivery volume.
In other words, 70-80 percent of volume in cash market in INTRADAY SEGMENT is done by speculators who do not take delivery of the shares in which they trade.

Now, what measures will Sebi take to restrict these volumes? New move to cut retailers(speculators) participation in INTRADAY CASH SEGMENT?

If SEBI doesn't want to restrict Intraday trading then what is the purpose of this move other than the collection of extra STT? Food for thought surely.

Agreed. And on the contrary, there should've been a move to increase algorithmic trading abilities for retail traders. Maybe there will be. See, it's all about having the right representatives who can paint the right picture. I'm sure SEBI has enough data and they are taking a conscious decision. I don't doubt their wisdom one bit but in this matter, it does come across as a bit draconian. Hopefully, there will be amendments.

 

[headstrong007]

Today one novice trader (I know him personally, actually a beginner) got huge easy money shorting ICICIBANK F&O just following previous day negative news. He used leveraged BO order type @opeing, with limited risk(small SL and good target).This is huge money according to his limited capital, he traded for 2 lots only. He is very happy. He mainly shorts Stock Futures on BAD NEWS. By managing the risk with BO he is doing satisfactorily.
Such shorting is also part of the game, but SEBI does not like such speculators as they do not add value to the market!

Many beginners are using such low-risk speculation using order type BO(already stop loss in place) with small capital. Investors mostly protected with BO-CO orders nowadays in F&O stocks.
It's unfair to stop such traders for SEBI in the name of investors protection when they are making money. Govt and SEBI don't like such shorters. Actually, 7 out of 10 news favor bears.
This is another reason they want to cut participation in Stock Futures.

Another important thing,
It is already proved that, the market makes bottom mainly bcoz short covering(->profit booking) at the lower level FIRST. No one like to catch a falling knife, only profit takers come first to buy heavily @ bottom. Set of buyers to come next when they saw the initial upward spikes, then the short covering by losers and finally come fresh buyers. That's how a large trending move happen in the market.
Similarly, shorters help to cut bubbles in the bull market, prevents market from the big crash.

By cutting retailers participation in F&O SEBI would hurt basic market structure for sure. It'll make our market stagnant. Yes, I doubt SEBI's wisdom in the above case. It is historically tested and proved(through extensive research and experiments) that without derivative market become inefficient and lose momentum for sure.

 

[timepass]

SEBI thinks that you are not mature enough to handle money unless you have a lot of bank balance, even if you are mature enough at 18 to vote for the Parliament (or get a liquor license at 21 or whatever)

 

[Verde]

I am visiting after a long time and seeing this bad news. this will finish off the retail traders. how many can afford 25 lakhs lot size?

why all are against sebi..they are only a mouthpiece for uneducated politicians who are behind this.
govt employees are slow but they are not fools.they understand what is the impact of this policy.
nothing will happen from change.org or petitions.
wait for the rule to be implemented and ask your congress, jds, aap mla to file a pil in the court. in 1 hearing the rule will be thrown out and the mla will get more bhav from his party.

 

[TraderGYO]

Today one novice trader (I know him personally, actually a beginner) got huge easy money shorting ICICIBANK F&O just following previous day negative news. He used leveraged BO order type @opeing, with limited risk(small SL and good target).This is huge money according to his limited capital, he traded for 2 lots only. He is very happy. He mainly shorts Stock Futures on BAD NEWS. By managing the risk with BO he is doing satisfactorily.
Such shorting is also part of the game, but SEBI does not like such speculators as they do not add value to the market!

Many beginners are using such low-risk speculation using order type BO(already stop loss in place) with small capital. Investors mostly protected with BO-CO orders nowadays in F&O stocks.
It's unfair to stop such traders for SEBI in the name of investors protection when they are making money. Govt and SEBI don't like such shorters. Actually, 7 out of 10 news favor bears.
This is another reason they want to cut participation in Stock Futures.

Another important thing,
It is already proved that, the market makes bottom mainly bcoz short covering(->profit booking) at the lower level FIRST. No one like to catch a falling knife, only profit takers come first to buy heavily @ bottom. Set of buyers to come next when they saw the initial upward spikes, then the short covering by losers and finally come fresh buyers. That's how a large trending move happen in the market.
Similarly, shorters help to cut bubbles in the bull market, prevents market from the big crash.

By cutting retailers participation in F&O SEBI would hurt basic market structure for sure. It'll make our market stagnant. Yes, I doubt SEBI's wisdom in the above case. It is historically tested and proved(through extensive research and experiments) that without derivative market become inefficient and lose momentum for sure.

Actually in this case BO/CO orders are not without risk. Any additional leverage is added risk. Most beginners think they can not lose more money than they have in their trading accounts which is not true. If one trades with multi-lot contracts then he/she should have an understanding about the Notional values of those contracts. I wish SEBI had rather taken a stand to educate small traders than to bar them from trading.
In ITR returns F&O tradings are under non-speculative gains/loses, then how come they say we are speculators here? any idea?

 

[headstrong007]

In ITR returns F&O tradings are under non-speculative gains/loses, then how come they say we are speculators here? any idea?

I already made this valid point in my letter to SEBI?
I said according to Income Tax Rule, 'Derivative trading is not speculation'. We must add this to the first line of the petition.

************
Stocks in F&O don't have any circuit limits. Currently, Brokers know how to manage the leverage risk in F&O very well. All brokers square off @80% loss. So-called investors protection or heavy speculation(using false turnover prem+strikes of options) are just excuse!

 

[Tejas Khoday]

SEBI thinks that you are not mature enough to handle money unless you have a lot of bank balance, even if you are mature enough at 18 to vote for the Parliament (or get a liquor license at 21 or whatever)

Good one, but SEBI did not issue voting rights at age 18 or license to drink at 21 . The government did that!

 

[Tejas Khoday]

Actually in this case BO/CO orders are not without risk. Any additional leverage is added risk. Most beginners think they can not lose more money than they have in their trading accounts which is not true. If one trades with multi-lot contracts then he/she should have an understanding about the Notional values of those contracts. I wish SEBI had rather taken a stand to educate small traders than to bar them from trading.
In ITR returns F&O tradings are under non-speculative gains/loses, then how come they say we are speculators here? any idea?

The Income Tax rules are framed by the Government Of India whereas the rules with regards to securities are governed by SEBI. That's why! Because it is mentioned in the IT act that derivatives income is not speculation does not mean SEBI will say, oh yeah we forgot about that .

 

[TraderGYO]

I already made this valid point in my letter to SEBI?
I said according to Income Tax Rule, 'Derivative trading is not speculation'. We must add this to the first line of the petition.

************
Stocks in F&O don't have any circuit limits. Currently, Brokers know how to manage the leverage risk in F&O very well. All brokers square off @80% loss. So-called investors protection or heavy speculation(using false turnover prem+strikes of options) are just excuse!

I was thinking about writing to them after they show their cards.
yes, you have made a strong point, their method of options turnover calculation is bit weird.

 

[Tejas Khoday]

A trend that is witnessed in the developed market where jobs are reducing and younger population taking to trading will soon be witnessed in Indian markets too.
Rather than educating market participants and ensuring liquidity in order to reduce transaction cost Sebi under the guise of investor protection is causing more harm. -Source Internet (Money Control).

Could you provide a link to the article?