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

[bpr]

yes...one could also deposit 10 lakhs in account and withdraw 2 days later what then ?

This reminds me of pattern day trade rule in US market
You need $25K balance at all times else you can do max 3 trades a week.
However for much leveraged Futures market they don'y have any restriction.
People can trade with as low as $2k

https://en.wikipedia.org/wiki/Pattern_day_trader

Is SEBI is trying to copy FINRA ??

 

[vikas2131]

Just think about the base of that report, SEBI mentioned the word "product suitability". It's not about something like the over-leveraging.

It's just like, they want to kick out some small retailers from the F&O market by stating that this product/segment F&O trading is NOT SUITABLE for you.

And they will use net worth certificate to do that.It will easiest to use too because we are already asked for net worth while we fill forms. Right now people who invest up to 2 lakhs , are considered retail investor but this limit was set in 2010 so i would not surprised if it is doubled and that might become minimum net-worth to trade in derivatives

 

[vikas2131]

This reminds me of pattern day trade rule in US market
You need $25K balance at all times else you can do max 3 trades a week.
However for much leveraged Futures market they don'y have any restriction.
People can trade with as low as $2k

https://en.wikipedia.org/wiki/Pattern_day_trader

Is SEBI is trying to copy FINRA ??

I doubt heavy restrictions will come in like minimum account balance in the beginning but possible in future if easier ones dn't get desired results. My opnion is , net-worth certificate would be enough to throw out a lot of retail traders .

 

[Pradeep Narayan]

Twisted thought:
Are the small traders proving to be a big problem for Big Traders (MF/DII/FII)? Sometimes a series of small moves by a large group of people can have a cascading effect on larger plans!

So is it that the large ones need protection - like in a bear market or a crash, a lot of small traders can quickly build large shorts and completely ruin distribution by a large fund. Are we about to witness a mother of all crashes... but witness it only & not be able to do anything about it?

 

[Vitthala]

imo,they wont put any restriction on daytrading equity because it gives huge money to Govt.
brokers also make huge money from day traders and many other jobs are dependent on this.

Equity leverage will be 2-4X only to avoid excess leverage,but again by applying that Govt will be in tax collection loss.Why will they put axe on their own feet?
@headstrong007

 

[headstrong007]

Equity leverage will be 2-4X only to avoid excess leverage,but again by applying that Govt will be in tax collection loss.Why will they put axe on their own feet?
@headstrong007

If you see total STT collection from Equity market per year, still it is not a big tax for Government, especially after GST is launched Government is getting huge indirect tax.
Now, they can easily sacrifice some STT to benefit big industrialist(they constant SIP money to the market) and big mutual funds players(banks are also behind them).

See the below news, Govt is getting more tax from indirect ways. This is old news, they even got more after it was published.

https://www.thehindubusinessline.co...-post-gst-economic-survey/article22552449.ece

Add up the extra money Govt already got by not transferring the petrol price benefit to common people in the last 3-4 years! Govt have the luxury.

IMO, not Govt is not putting the axe on their own feet but working on the behalf of some big industrialist, mutual funds, and banks. Govt already made a rule to invest common peoples PF money to risky stock market. With time they want more money flow to the stock market.

Banning the common people to direct entry into the stock market is the easiest way to increase the money flow to mutual funds.
But, people also lose heavily through mutual funds during the market crash, due to the panic the sell at the bottom. In 2008 many people lost huge money through mutual funds too.

 

[Riskyman]

yes you are right,but their logic is mutual fund are not traded on leverage
we invest in installments just like paying a loan

There is no one giving you unlimited amount of leverage. Your ability to gain leverage is only limited by how much you are willing to contribute. An investment in a small cap mutual fund at the peak of 9650 in Jan 2018 is now worth 7522 eight months down the line. The point is, there are risks everywhere. no investment is risk free. Even those who invested a year ago in Turkish government bonds are facing risks. So Equity/Mutual fund is no different. Tomorrow, the government will say "do not invest in a business because there is potential to lose 100% of your capital". What are you going to do? Do not start a pakoda shop because there is risk of losing money. What do you do? Risk is inherent in all human endeavor. Risk and reward have to coexist. There is no reward without a risk. There are no free lunches in this world.

 

[Vitthala]

as per this link-
https://www.thebalance.com/day-trading-restrictions-on-us-stocks-1031352

Day traders in the U.S. are allowed to use up to 4:1 leverage. That means that if a day trader deposits $30,000 in his account, he can accumulate positions up to $120,000.

so may be,we'll be allowed 4X margin to trade cash market intraday

 

[Riskyman]

Anyways.... All of this will only lead to more saata baazi. Should this crap be introduced by SEBI, even I will be encouraged to underwrite Reliance options from my parking for much less premiums. Not to forget, I can make my own lot size for the guy with less capital. Gosh why is this country becoming so regressive?? With whatsapp, and super fast internet anyone with some basic human brain can set up a good network of dabba trading. While the world walks forward, we take pride in walking backwards.

 

[Vitthala]

Anyways.... All of this will only lead to more saata baazi. Should this crap be introduced by SEBI, even I will be encouraged to underwrite Reliance options from my parking for much less premiums. Not to forget, I can make my own lot size for the guy with less capital. Gosh why is this country becoming so regressive?? With whatsapp, and super fast internet anyone with some basic human brain can set up a good network of dabba trading. While the world walks forward, we take pride in walking backwards.

this is already happening side by side
those Dabba Traders taking price quotes from NSE.They have made their own terminal to place buy and sell order.Profit is cash settled.
2-3 raids were there and it was a news in newspaper too that there was a fight between a broker and a lady inverter in Dabba