look news india
MUMBAI: The working committee on futures and options has recommended increasing the minimum lot size of derivative contracts from the current Rs 5 lakh to Rs 20 lakh to Rs 30 lakh and having a single weekly option expiry every week for each stock market. Besides, due to the extraordinary rise in volumes in derivatives, a cap on the number of strike prices for option contracts has also been recommended to prevent small retail investors from taking risks, sources said.
The expert working committee was appointed by capital market regulator Sebi last month in view of the risks including excessive speculation and over-involvement in F&O by the public in recent years. If the working committee's suggestions are accepted, it will have the biggest impact on volumes. If there is a sharp increase in contract size, it will not be affordable for small traders and secondly, if the number of weekly expiries is also limited, there is likely to be less space for traders to play.
Further, sources said, the committee's recommendations include fixing a cap on strike prices, upfront collection of option premium from option buyers, intra-day monitoring of position limits and further increase in margin requirement near expiry. The recommendations of this panel will be considered by the Secondary Market Advisory Committee before taking a final decision.
It is worth noting that SEBI's study found that 9 out of 10 traders betting on options are incurring losses. Many individual retailers are also known to borrow money to trade in options. Which SEBI found a matter of concern.