F&O: SEBI gives seven suggestions to save retail investors; An exercise to save the sinking savings of retail investors

Amid concerns over the sinking savings of retail investors in Futures and Options (F&O), SEBI has suggested seven measures to protect them. SEBI Chairperson Madhabi Puri Buch said, families are suffering losses of up to Rs 60,000 crore a year in F&O. In 2023-24, 92.5 lakh retail investors and proprietorship firms suffered a loss of Rs 51,689 crore in F&O.

The existing strike price introduction method should be rationalized. The strike interval should be nearly uniform to the prevailing index value (around 4 percent of the current price). The gap should increase as the strike moves away from the prevailing price (about 4 percent to 8 percent).

Given the difference in volumes on expiry day as compared to other non-expiry days and the liquidity risk associated therewith, margin benefits for calendar spread positions will not be provided for situations where any of the contracts expire on the same day.

Position limits for index derivative contracts will be monitored by the clearing corporations/stock exchanges on an intraday basis. A smooth path for full implementation will be laid down with due diligence and taking into account the need for related technology changes.

The value of the derivatives contract should be increased from Rs 5 lakh to Rs 10 lakh from Rs 15 lakh to Rs 20 lakh in the first phase and from Rs 20 lakh to Rs 30 lakh in the second phase.

Weekly contracts expire on all five trading days of the week. In such a situation, weekly option contracts should be offered on a single benchmark index of an exchange.

Sebi said the loss margin (ELM) for entities dealing in options should be increased by 3 to 5 per cent on a notional basis to deal with higher risks in option contracts near expiry.