The Securities and Exchange Board of India (SEBI) has issued a press release underlining the need for analysis and disclosure of risks of trading in the Futures and Options (F&O) segment. The press release was issued on 25th January, 2023.
Under the supervision of a working group, SEBI has conducted an analysis of the trends in both participation and in profits and losses of individual traders in the equity F&O segment. This study is available on the SEBI website.
Some of the major findings of the study are as under:
- There has been a significant increase of over 500% in the number of individual traders in the equity F&O segment in FY 2021-22, as compared to FY 2018-19
- 98% of individual traders in the equity F&O segment traded in options during FY 2021-22
- 9 out of 10 individual traders in the equity F&O segment incurred net losses during both the years FY 2018-19 and FY 2021-22
- On average, loss makers registered net trading loss close to ₹50,000 in FY 2021-22. The average absolute net loss of a loss maker was over 15 times the net profit made by a profit maker
- Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs
- Those making net trading profits incurred between 15% to 50%* of such profits as transaction cost
SEBI will also shortly issue guidelines in respect of additional risk disclosures required to be made by brokers and exchanges to investors.