I have not read the SEBI paper. I came here to ask another question but caught this thread and thought it more important to reply.
I am trader and have been trading since last 5 years. Rather, I started 5 years ago and kind of started trading only since 2-3 years or so.
I have faced many odds right from learning to choose right stocks, when to sell and when to buy, several other different technical problems that a day trader faces, like order mismatch etc.
All of this led me to FnO, which is quite fascinating as it not only gives good leverage, but allows to hold a position for a fraction of the amount that normal delivery would cost.
For me it is the holy grail of day trading. If one is good at technical analysis (won more than 80% of trades), then FnO is the thing to go for.
Also, when I started there were one or two scrips that could be traded for below Rs. 10000 and that was a huge draw for me. But soon things changed and I couldn’t trade because of high margin requirement, change of lot size.
Low margin requirement enables high market participation, leading to liquidity of scrip in question. If there are less people scrips will be more illiquid and less tradeable and higher chances of getting stuck. Which would mean further loss of market participation.
Not only that, by increasing margins and making it more difficult, SEBI will only be hurting the small retailer more as many of them will lose their chance to take part in this market.
Also, those who can afford and still want to trade in FnO, they will still take part and will be at a greater risk of losing money.
SEBI cannot control kids into going into the mango orchard by building bigger stronger walls. Someone will find a way to make a hole in it or way to climb it. And when that happens, it will be disaster.
Rather, SEBI should take efforts in educating the traders about the dangers of trading in FnO and how to avoid it (for the most part).
I think SEBI doesn’t want people to trade in FnO so making this excuse. Perhaps it wants people to take deliveries and sit on profit or loss for ages as most people do, traditionally.
It’s like saying, we will build more speed bumps on expressways to reduce accidents. But that is highly impractical. If you don’t want accidents due to speed then why build the expressway in first place. It’s highly ridiculous and I would highly oppose such a move.