Retail engagement in the F&O industry would be scrutinised by SEBI.
The increased total retail involvement in equities markets has the regulator concerned, since F&O transactions expose inexperienced investors to higher financial risk.
Concerned about increased retail involvement in the Futures and Options (F&O) sector, the Securities and Exchange Board of India has launched a research to assess the level of retail engagement in this market, according to Business Line.
If necessary, the study’s findings might lead to regulatory innovation.
“The study’s results will be made public shortly.” “SEBI is worried about the dangers involved with the F&O business, as well as the rising number of retail investors entering this area,” a person close to the situation said. “The market regulator will consider appropriate steps based on the study’s results.”
Investing in F&O is riskier than investing in equities. This group is often populated by high-net-worth people, traders, and speculators, according to Business Line.
Far more dangerous
However, increased total retail involvement in equities markets has the regulator concerned, since F&O transactions expose uninformed investors to higher financial risk while also making the market speculative.
Futures contracts compel the purchasing and selling parties to transact securities at a set future price and date.
According to market observers, the current increase in volatility is luring investors looking to profit from the strong swings in the bourses. Large swings in the wrong way, on the other hand, may swiftly drain cash, particularly for rookie investors. Individual investors are prevalent in India’s stock market.
According to NSE statistics, approximately 90 lakh new investors joined the trading platform in FY2021. Between May 2020 till lately, the BSE gained almost 1.8 crore new investors. Data also reveal that millennials account for a sizable proportion of new investors.
According to NSE statistics, more than half of new traders came from cities outside than India’s top 50 most populous. It is thought that this group is unaware of the hazards linked with the F&O market.
“The survey will provide SEBI with accurate information on the degree of retail engagement in the F&O category.” “The data will be essential in developing appropriate legislation to safeguard investors,” a source added. This article was published in Mint on 19th May 2022.
