The capital market watchdog SEBI (Securities and Exchange Board of India) had made it clear that it is not in favour of small (retail) investors trying their luck with complex derivative ( Future and Options - F&O) products.
SEBI had directed stock exchanges to discontinue mini derivative contracts on Sensex & Nifty that were essentially launched to attract retail investors to the F&O segment.
SEBI circular Details..!
SEBI Stated in the circular, said, “With a view to ensure that small / retail investors are not attracted towards derivatives segment (F & O), it has now been decided to discontinue mini derivative contracts on index (Sensex & Nifty)”
The SEBI circular had further said,' No fresh mini derivatives contracts can be issued though the existing unexpired contracts will be permitted to trade till expiry & new strikes can also be introduced in the existing contract months."
The latest move by the SEBI is also, in a way, a U-turn when compared to the stance it took in 2007 when it approved the launch of such mini-contracts with the criteria that the minimum contract size would be Rs. 1 lakh. The lower contract size was primarily aimed at attracting small / retail investors to the F and O.
In December 2008, a report by the derivatives market review committee- under the chairmanship of Mr. M. Rammohan Rao- had said that “based on the experience with mini contracts in index F & O, introduction of mini-contracts in single stock F&O could be considered.”
The regulator's move would, however, impact a significant part of the market as exchange data clearly shows that mini-contracts on Sensex & Nifty had a combined daily turnover in the range of Rs. 250 to Rs. 300 crore.
The step also reiterates SEBI Chairman Mr. UK Sinha's oft repeated warning aimed at market intermediaries indulging in mis-selling of products.
At various investment conferences, the SEBI Chairman Mr. UK Sinha had said that fund managers & brokers should desist from selling risky and complex products to uninformed investors.
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