Tiny FII vs Retail/Prop Behemoths

[VijayNair]

FII generate less than 8% volume in Index Options (?)

1. Around 50% of the Index Options trading volumes in India is driven by Prop-traders, retailers are 2nd at 35%. Dont underestimate the power of a common man

2. Smaller opportunity with F&O with less than 1.5-2 Mn regular active traders.

3. Newbie traders come and go quick. Terrible retention rates. Newbie traders lose money, some even lose principal and out from market in just few weeks or months. For some firms, churn rates > 90% in 90 to 180 days.

Oritingal tweet
https://twitter.com/BeingPractical/status/1746586971127091453?s=20

@nithin Is this accurate?

[nithin]

@VijayNair

FII generate less than 8% volume in Index Options (?)

1. Around 50% of the Index Options trading volumes in India is driven by Prop-traders, retailers are 2nd at 35%. Dont underestimate the power of a common man
2. Smaller opportunity with F&O with less than 1.5-2 Mn regular active traders.
3. Newbie traders come and go quick. Terrible retention rates. Newbie traders lose money, some even lose principal and out from market in just few weeks or months. For some firms, churn rates > 90% in 90 to 180 days.

@nithin Is this accurate?

Yep

Here is the link. Page 175 onwards.

https://nsearchives.nseindia.com/web/sites/default/files/inline-files/MarketPulse_February2024_FINAL_v2_1.pdf

[dtyxg]

So if FPI/FII open a office in INDIA and trade with their own funds would it be considered as PROP TRADES ?

[nithin]

@dtyxg

So if FPI/FII open a office in INDIA and trade with their own funds would it be considered as PROP TRADES ?

You can’t just open an office and turn FII into prop. The question is where does the money come from? If it is foreign the FII.

But looking at this volume alone is not of much use, you need to see this as a combination of OI.

Btw the reason for FII and DII since 2020 is due to Covid restrictions which have since been not relaxed. The limit of Rs 500 crore per FII/DII limit.

[siva]

@nithin

Btw the reason for FII and DII since 2020 is due to Covid restrictions which have since been not relaxed. The limit of Rs 500 crore per FII/DII limit.

The data available also includes trades happening at NSE giftcity? options volumes are less only on GIFT but futures seems moderate, so when we get FII data does that includes gift city volume and volumes on NSE combined? or how it works? Also that 500cr per FII is on NSE only or GIFT also?

[nithin]

@siva

The data available also includes trades happening at NSE giftcity? options volumes are less only on GIFT but futures seems moderate, so when we get FII data does that includes gift city volume and volumes on NSE combined? or how it works? Also that 500cr per FII is on NSE only or GIFT also?

No, it doesn’t include GIFT city. The 500cr limit is not on GIFT City.

[siva]

@nithin

No, it doesn’t include GIFT city.

Thanks, so current FII OI data can be skewed as it does not include GIFT data? because futures volume on GIFT is considerable?

[VijayNair]

@siva

Thanks, so current FII OI data can be skewed as it does not include GIFT data? because futures volume on GIFT is considerable?

Index Options arent traded much there… Its mainly Futures.

[siva]

@VijayNair

Its mainly Futures.

Yeah, I meant only about futures. If FII’s can trade on GIFT and on NSE and GIFT having decent volumes on futures but the data we get only include NSE data.

[VijayNair]

@siva

Yeah, I meant only about futures. If FII’s can trade on GIFT and on NSE and GIFT having decent volumes on futures but the data we get only include NSE data.

The data in the OP is about Index Options only. FII are small players and Retailers tower over FII (in volume) in Index Options is the whole premise.

[siva]

@VijayNair

The data in the OP is about Index Options only.

I agree, I also mentioned GIFT has no volumes in options, my query is in general and agree to the data which says Retail is big now compared to FII in options.