Confused, surprised with investor interest in F&O- Sebi chairperson

Confused, surprised with investor interest in F&O: Sebi chairperson

Securities and Exchange Board of India (Sebi) chairperson Madhabi Puri Buch came down hard on retail investors dabbling in the future and options (F&O) market and said that she is ‘confused and surprised’ at their interest despite evidence suggesting that 90% losing money in the segment.

“I must admit, I am always a little confused and surprised as to why people continue to do that (bet in F&O) knowing that the odds are not in their favour at all,” Buch said.

Speaking during the launch of the Investor Risk Reduction Access (IRRA) platform at the Bombay Stock Exchange (BSE), Buch pointed to a recent research by the markets regulator, which pointed out that only 11% of the 4.5 million individual traders in the F&O segment, made profit.

As per the Sebi research paper, the average loss booked by 89 per cent of people who lost money on F&Os in FY22 stood at Rs 1.1 lakh, while for the minority which was lucky enough to be in the black, the average profit was Rs 1.5 lakh.

“There is a 90% chance that the investor will lose money in the F&O segment, but we also know, and the data shows us, that if you take a long-term view of the market, and if you invest with a long-term perspective, you will rarely go wrong,” she added.

She urged individual investors to look long term as there is a “very good chance” that an investor will create wealth over a sustained period of time that will exceed the inflation rate in the economy”.

On Monday, BSE inaugurated the IRRA platform, which is a platform that helps investors square off or exit their positions, when their broker’s platform faces a technical glitch. 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.

Commenting on the platform, she said that “it is like a safety net for a trapeze artist, he hopes to never use it, but it has to be there.” Buch added that no matter how resilient the systems, there is always a small and finite risk and that’s where the risk reduction platform comes into play.

On industry standards forum, set up to ease implementation of regulations, she said that the forums have received 50 items for consideration and significant progress has been made on most of them.

In August, Sebi had proposed through a circular that such forums would formulate standards for implementation of specific regulations and circulars, based on feedback from industry and stakeholders. The three industry associations, ASSOCHAM, FICCI, and CII were to develop guidelines to implement measures concerning the verification of rumors, and fulfillment of environment, social, and governance assurance requirements.