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SEBI Chairman surprised at investors’ interest in F&O, urges traders to focus on long-term wealth creation

Securities and Exchange Board of India (SEBI) Chairperson Madhabi Puri Buch expressed confusion and surprise over investors’ interest in Futures and Options (F&O), even though 90 per cent of investors lose money in this category. Buch said investors need to think long term and said the chances of making inflation-beating returns through this strategy are much better.

Speaking at the launch of the Investor Risk Reduction Access (IRRA) platform at the Bombay Stock Exchange, the market regulator executive talked about SEBI’s recent research which found that about 11 per cent of the 45.24 lakh individual traders in the F&O category Earned profit. As per PTI report, the research revealed that the overall participation in the F&O segment saw a significant increase during the pandemic, and the total number of unique individual investors increased by over 500 per cent from 7.1 lakh traders in FY2019.

Commenting on the popularity of this investment category, Butch said, “I have to admit, I’m always a little confused and surprised as to why people continue to do this (bets in F&Os) despite knowing that the odds are absolutely in their favor. Are not in favor. There is a 90 percent 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 from a long-term perspective, you will hardly Will be wrong sometimes. There is a very good chance that an investor will create wealth over a long period of time that will exceed the inflation rate in the economy, if the investment calls are for a long period.

The SEBI official urged investors to work towards adopting a long-term and sustainable approach to investments to increase the potential for wealth creation rather than incurring losses on a daily basis in the F&O segment.

A SEBI research paper revealed that 89 per cent of investors who lost money on F&O suffered an average loss of Rs 1.1 lakh in FY22, while the minority investors who managed to make profits in this segment made an average profit of Rs 1.5 lakh. Happened. , More than a third of investors in the F&O category were in the 20 to 30 age group, compared to 11 per cent in FY19.

Buch also said that SEBI will issue a revised notification regarding upstreaming of funds after receiving feedback from brokers regarding problems in compliance with norms. He said the broking industry and exchanges have agreed on 50 items dedicated to simplifying operations and standard setting. The executive also appreciated the stakeholders for collaborating together.

Notably, SEBI had first announced the launch of IRRA in December 2022. IRRA provides a platform where the trader can take decisions on open positions in case the broker’s system goes down. Buch said measures have been taken to reach a right balance between the requirements in a worst-case scenario to provide the option and price of generating such capacity. He expressed hope that the system would be efficient in delivering on the promise.

Also read: RBI’s decision to impose higher risk weight on unsecured personal loans positive: Moody’s



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