Sebi’s October 16, 2023, circular on stock exchanges and clearing corporations stipulates contract size for index futures and index options between Rs 5 lakh and Rs 10 lakh.
While this limit was last set in 2015, broad market values and prices have increased by around three times since then and considering this the regulator decided the derivative contract to be not less than Rs 15 lakh.
“Further, the lot size shall be fixed in such a manner that the contract value of the derivative on the day of review is within Rs 15 lakh to Rs 20 lakh. All other stipulations for contract size of index derivatives as mentioned in the Master Circular referred above shall remain unchanged,” the circular said.
The move has been taken in view of the inherent leverage and higher risk in derivatives and Sebi on Tuesday said this recalibration in minimum contract size is in tune with the growth of the market. It is expected to ensure that the inbuilt suitability and appropriateness criteria for participants is maintained as is intended.
In a clear reflection of how households are losing money by betting on the high-risk high-reward game of options trading, a Sebi study revealed that 1.13 crore retail F&O traders incurred a combined net loss of Rs 1.81 lakh crore in the last three financial years of FY22-FY24.”Individual category traders made an average per person loss of Rs 1.60 lakh over the period of three years. For the loss-makers, the average loss was about Rs 2 lakh per person, whereas for the profit-makers, the average per person profit was Rs 3 lakh per person,” Sebi said in its study.During the period, nearly 93% retail traders (more than 1 crore in number) lost Rs 2 lakh per person on an average. Among the top 3.5% of loss-makers, about 4 lakh traders faced an average loss of Rs 28 lakh per person over the same period, inclusive of transaction costs.
The decision comes a day after the Sebi board meeting, where among other things the market watchdog approved a new asset class on Monday, allowing high-net-worth investors to invest in riskier regulated products. The new asset class is to have a minimum investment amount of Rs 10 lakh.
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