The capital market watchdog SEBI (Securities and Exchange Board of India) 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.
NSE (National Stock Exchange) will have to discontinue its product after its 3 - month contract of the Mini Nifty expires in December, 2012
The BSE (Bombay Stock Exchange) had applied to Sebi for re-launching mini contracts for the Sensex .
“With a view to ensure that small/retail investors are not attracted towards the segment, it has now been decided to discontinue mini derivative contracts on Index,” Sebi said.
NSE will have to dis-continue its product after its three-month contract of the Mini Nifty expires in December.
However, the 3rd exchange, the new MCX - SX, will not be affected, as it has said it is thrust will be mainly on delivery-based trading, rather than derivatives.
Mr. Savio Shetty , Strategist, Prabhudas Lilladher, said, “Discontinuation of mini contracts would not have much impact on the derivative market volumes, as the open interest in this product was already very low.”
Mr. Yogesh Radke , Head, Quantitative Research, Edelweiss Securities said, “Discontinuation of mini contracts is largely a non-event from the market point of view, as open interest in these contracts was thin. The product was meant for a very specific category of investors, who wanted to take small - size bets on the Nifty. Retail / small investors always have an option of trading in Nifty contracts, which are highly liquid”
Experts say while SEBI has taken a step to discourage derivative trading by retail investors, the central government needs to bring down the Securities Transaction Tax ( STT ) in cash equities. STT on derivative trading, at 0.017%, is lower than that in the cash equity segment, at 0.025%.
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