There has been talks of SEBI coming up with regulation to reduce derivative exposure for retail traders. Find below from SEBI board meeting held today.
Unlike what was expected, lot sizes aren’t being changed.
To reflect global initiatives on product suitability, a framework has been approved. Individual investors may freely take exposure in the market(cash and derivatives)upto a computed exposure based on their disclosed income as per their Income Tax Return(ITR) over a period of time. For exposure beyond the computed exposure, the intermediary would be required to undertake rigorous due diligence and take appropriate documentation from the investor.
It will be interesting to see how this exposure based on disclosed income will be calculated. Also what kind of diligence will brokers be asked to allow clients exposure beyond this calculation. Looks like something which will definitely reduce the number of retail participants on the derivatives market.
Also i don’t know how operationally all of this will work. A client can give the same ITR proof with multiple brokers and take a lot more exposure. So the exposure limits will have to be set at exchange levels. hmm… will be interesting to see how this evolves.