The Securities and Change Board of India (Sebi) has requested inventory brokers to alert traders in regards to the dangers of buying and selling in futures and choices (F&O) on their web sites, in addition to each time they place a derivatives order, two brokers confirmed.

Brokers should now alert their prospects about information on derivatives buying and selling equivalent to; 9 out of 10 particular person merchants in equities F&O incurred web losses; on common, they’d web buying and selling loss near ₹50,000; additionally they spent 28% extra of web buying and selling losses as transaction prices; and within the uncommon cases after they made web buying and selling earnings, they incurred 15-50% of such earnings as transaction prices.

An e mail despatched to a Sebi spokesperson looking for remark remained unanswered until press time.

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“It’s akin to the warning on cigarette packets in regards to the dangerous results of tobacco. Does it cease individuals from smoking?” questioned Rajesh Baheti, director of broking firm Crosseas Capital, when requested whether or not such disclaimers would act as an efficient deterrent. He claimed that the disclaimers come within the wake of low cost brokers “luring” retail traders to commerce on equities choices, and it was extra like “caveat emptor” — a notice of warning for consumers.

Apparently, Nithin Kamath, co-founder of Zerodha, the nation’s largest retail dealer, stated his firm just lately warned its lively shoppers in regards to the pitfalls of buying and selling in derivatives.

“We now have used each alternative to create consciousness that in the long term (three-year interval), lower than 1% of those that actively commerce fairness futures and choices generate returns greater than financial institution mounted deposits or 7% yearly,” Kamath stated.

Deven Choksey, promoter of KRChoksey Group, confirmed the Sebi diktat, including it might make traders “cognizant” of the dangers they confronted whereas dabbling in such devices.

Whereas retail traders’ participation within the capital markets phase of the nation’s largest inventory alternate NSE has fallen sharply, their derivatives publicity continues to stay excessive. Within the money market, the place shares are purchased and bought, the share of retail investor buying and selling plunged to 36.5% in FY23 from 45% in FY21. The market share of retail traders in derivatives shot up with the outbreak of the covid on the finish of FY20 and moderated thereafter however stays excessive in contrast with overseas portfolio traders and corporates, NSE knowledge reveals.

As a proportion of notional turnover, the retail market share jumped to 29.2% in FY21 from 23% in FY16. In FY23, it stood at 27.7%, down 30 bps from FY22. It’s vital that this class of traders is the second-largest after proprietary merchants (53.1% in FY23 from 48.8% in FY22) within the derivatives phase.