In a bid to protect individual investors trading in equity Futures & Options (F&O) segment, SEBI has asked all stock brokers to display ‘Risk disclosures’ on their websites and to all their clients.
“Upon logging into their trading accounts with brokers, the clients may be prompted to read the ‘Risk disclosures’ (which may appear as a pop-up window upon login) and shall be allowed to proceed ahead only after acknowledging the same. The ‘Risk disclosures’ shall be displayed prominently, covering at least 50 percent area of the screen,” SEBI said in a circular.
SEBI has also asked all Qualified Stock Brokers (QSBs) to maintain the Profit and Loss (P&L) data of their clients on continuous basis as for at least 5 years.
A study by market regulator SEBI shows that 9 out of 10 individual traders were making losses in the F&O segment. They made an average loss of ₹1.1 lakh during financial year 2022. As high as 90 per cent of active traders incurred an average loss of ₹1.25 lakh.
India is the world’s largest market for trading in equity F&O, which most experts say is nothing but a form of gambling. Yet, F&O trading has seen a stupendous five-fold growth in less than four years between FY19 and FY22.
According to SEBI, samples from only the top 10 brokers showed that in FY22 there were 45.2 lakh unique individual traders in the F&O segment, up from just 7.1 lakh in FY19. Of this, 88 per cent were active traders, who were making consistent losses. Over 80 per cent of traders in the F&O segment were male.