November 23, 2015

F&O volumes drop after increase in contract size

Volumes in the derivatives market have seen a sharp dip in November after the market regulator raised the bar for participation in the equity derivatives segment in an attempt to curb retail investor activity in this relatively high-risk segment.

This was done due to fears that retail investors were becoming more active in this segment and could be put at risk.

For the month of November so far, the average daily volumes on National Stock Exchange (NSE) have dropped sharply to 3.37 million contracts from 8.78 million contracts in October.

Jayant Manglik, president of retail distribution at Religare Securities Ltd, said that fewer people are now trading in derivatives, which he says was the intent behind Sebi’s changed policies.
Views on whether Sebi’s decision was right or wrong are still mixed.
“It is a good move. In the medium to long run, it will definitely help,” said Nitn Jain, chief executive officer of global asset and wealth management at Edelweiss Financial Services Ltd.
“A lot of derivatives volumes were driven by guys who should not have been there in the first place. They play on high leverage and low brokerage.”

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