Sebi chair Buch cautions investors against heavy F&O bets
New Delhi, Nov 20, 2023
Investors should instead concentrate on long-term prospects offered by equity markets, Buch said
Securities and Exchange Board of India (Sebi) chairperson Madhabi Puri Buch on Monday cautioned retail traders against heavy betting in the derivatives market.
Investors should instead concentrate on long-term prospects offered by equity markets, Buch said, speaking at the launch of the Investor Risk Reduction Access (IRRA) platform.
Buch recalled a study carried out by Sebi last year which showed nine out of ten investors lost money in the derivatives market. Trading on a short-term basis could lead to situations where the investors incur losses on a weekly basis, she added.
The Sebi chairperson said if investors take long-term view, the possibility of investment calls going wrong would be lower. “(In long-term investments) there is a very good chance that you would be creating wealth over a sustained period of time which will exceed the inflation rate in the economy and you would get a real rate of return on your investment over a long term," she said.
IRRA is a platform created by exchanges to help investors square-off, close or cancel their existing positions in the derivatives market in case of any technical glitch at broker’s end. In the last few years, many brokers have witnessed glitches in their online applications, especially closer to expiry when volumes are higher. In such a scenario, IRRA would help investors ensure their positions are settled in a timebound manner. The platform is intended to reduce the potential risks involved for retail traders in case of glitches and is not intended to take fresh positions, Buch added.
In the past, there have been cases where brokers forcibly closed the positions of their clients post glitches to ensure margin calls are not triggered. Buch said only the individual investor should take calls on his or her positions and not any other entities.
Investors must have control of their assets and positions and nobody else should have unauthorized access to those assets or positions, she said.
Buch also highlighted the new collaborative approach being adopted by Sebi where stakeholders are given the opportunity to come up with industry standards. In this approach, Sebi enacts the macro rules while industry bodies are consulted to come up with finer compliance requirements for such rules.
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