SEBI's new move to cut retailers participation in F&O!

[Pankshri]

A Fifth Of Stocks In NSE Derivatives Segment To Move To Physical Settlement From July.

NSE announces 46 stocks for physical settlement.
OTM Option writers will face the heat, some are making easy money on expiry, they let them expire worthless! Now they will face physical settlement! If writers exit, buyers would not get the good price(wider bid-ask) for short-term trading. Roll over in future possible but not always possible in stock specific options, especially in such low liquid stocks.
Many times buyers trapped and they will find it difficult to sell due to low liquidity, now physical settlement will add up their sorrows.

SEBI is actually banning option trading in individual low liquid stocks indirectly.

************
Here are the list of stocks that will be settled via physical settlement from July contract onwards in line with the SEBI guidelines,

1. Adani Power Ltd.
2. Ajanta Pharma Ltd.
3. Allahabad Bank
4. Andhra Bank
5. Balrampur Chini Mills Ltd.
6. Beml Ltd.
7. Berger Paints (I) Ltd,
8. Can Fin Homes Ltd.
9. CG power And Industrial Solutions Ltd.
10. Chennai Petroleum Corporation Ltd.
11. DCB Bank Ltd.
12. Godfrey Phillips India Ltd.
13. Godrej Industries Ltd.
14. Granules India Ltd.
15. Gujarat State Fertilizers & Chemicals Ltd.
16. Hexaware Technologies Ltd.
17. Hindustan Construction Company Ltd.
18. IDBI Bank Ltd.
19. IFCI Ltd.
20. Jaiprakash Associates Ltd.
21. Just Dial Ltd.
22. Kaveri Seed Company Ltd.
23. Kpit Technologies Ltd.
24. Mahanagar Gas Ltd.
25. Mangalore Refinery And Petrochemicals Ltd.
26. NHPC Ltd.
27. NIIT Technologies Ltd.
28. Oil India Ltd.
29. Oracle Financial Services Software Ltd.
30. Oriental Bank Of Commerce
31. PTC India Ltd.
32. PVR Ltd.
33. Reliance Communications Ltd.
34. Reliance Naval And Engineering Ltd.
35. Reliance Power Ltd.
36. Repco Home Finance Ltd.
37. Siemens Ltd.
38. SREI Infrastructure Finance Ltd.
39. SRF Ltd.
40. Syndicate Bank
41. The Ramco Cements Ltd.
42. Torrent Power Ltd.
43. TV18 Broadcast Ltd.
44. United Breweries Ltd.
45. V-guard Industries Ltd.
46. Wockhardt Ltd.

https://www.bloombergquint.com/markets/2018/04/23/a-fifth-of-stocks-in-nse-derivatives-segment-to-move-to-physical-settlement-from-july

A Fifth Of Stocks In NSE Derivatives Segment To Move To Physical Settlement From July.

NSE announces 46 stocks for physical settlement.
OTM Option writers will face the heat, some are making easy money on expiry, they let them expire worthless! Now they will face physical settlement! If writers exit, buyers would not get the good price(wider bid-ask) for short-term trading. Roll over in future possible but not always possible in stock specific options, especially in such low liquid stocks.
Many times buyers trapped and they will find it difficult to sell due to low liquidity, now physical settlement will add up their sorrows.

SEBI is actually banning option trading in individual low liquid stocks indirectly.

************
Here are the list of stocks that will be settled via physical settlement from July contract onwards in line with the SEBI guidelines,

1. Adani Power Ltd.
2. Ajanta Pharma Ltd.
3. Allahabad Bank
4. Andhra Bank
5. Balrampur Chini Mills Ltd.
6. Beml Ltd.
7. Berger Paints (I) Ltd,
8. Can Fin Homes Ltd.
9. CG power And Industrial Solutions Ltd.
10. Chennai Petroleum Corporation Ltd.
11. DCB Bank Ltd.
12. Godfrey Phillips India Ltd.
13. Godrej Industries Ltd.
14. Granules India Ltd.
15. Gujarat State Fertilizers & Chemicals Ltd.
16. Hexaware Technologies Ltd.
17. Hindustan Construction Company Ltd.
18. IDBI Bank Ltd.
19. IFCI Ltd.
20. Jaiprakash Associates Ltd.
21. Just Dial Ltd.
22. Kaveri Seed Company Ltd.
23. Kpit Technologies Ltd.
24. Mahanagar Gas Ltd.
25. Mangalore Refinery And Petrochemicals Ltd.
26. NHPC Ltd.
27. NIIT Technologies Ltd.
28. Oil India Ltd.
29. Oracle Financial Services Software Ltd.
30. Oriental Bank Of Commerce
31. PTC India Ltd.
32. PVR Ltd.
33. Reliance Communications Ltd.
34. Reliance Naval And Engineering Ltd.
35. Reliance Power Ltd.
36. Repco Home Finance Ltd.
37. Siemens Ltd.
38. SREI Infrastructure Finance Ltd.
39. SRF Ltd.
40. Syndicate Bank
41. The Ramco Cements Ltd.
42. Torrent Power Ltd.
43. TV18 Broadcast Ltd.
44. United Breweries Ltd.
45. V-guard Industries Ltd.
46. Wockhardt Ltd.

https://www.bloombergquint.com/markets/2018/04/23/a-fifth-of-stocks-in-nse-derivatives-segment-to-move-to-physical-settlement-from-july

 

[Pankshri]

A Fifth Of Stocks In NSE Derivatives Segment To Move To Physical Settlement From July.

NSE announces 46 stocks for physical settlement.
OTM Option writers will face the heat, some are making easy money on expiry, they let them expire worthless! Now they will face physical settlement! If writers exit, buyers would not get the good price(wider bid-ask) for short-term trading. Roll over in future possible but not always possible in stock specific options, especially in such low liquid stocks.
Many times buyers trapped and they will find it difficult to sell due to low liquidity, now physical settlement will add up their sorrows.

SEBI is actually banning option trading in individual low liquid stocks indirectly.

************
Here are the list of stocks that will be settled via physical settlement from July contract onwards in line with the SEBI guidelines,

1. Adani Power Ltd.
2. Ajanta Pharma Ltd.
3. Allahabad Bank
4. Andhra Bank
5. Balrampur Chini Mills Ltd.
6. Beml Ltd.
7. Berger Paints (I) Ltd,
8. Can Fin Homes Ltd.
9. CG power And Industrial Solutions Ltd.
10. Chennai Petroleum Corporation Ltd.
11. DCB Bank Ltd.
12. Godfrey Phillips India Ltd.
13. Godrej Industries Ltd.
14. Granules India Ltd.
15. Gujarat State Fertilizers & Chemicals Ltd.
16. Hexaware Technologies Ltd.
17. Hindustan Construction Company Ltd.
18. IDBI Bank Ltd.
19. IFCI Ltd.
20. Jaiprakash Associates Ltd.
21. Just Dial Ltd.
22. Kaveri Seed Company Ltd.
23. Kpit Technologies Ltd.
24. Mahanagar Gas Ltd.
25. Mangalore Refinery And Petrochemicals Ltd.
26. NHPC Ltd.
27. NIIT Technologies Ltd.
28. Oil India Ltd.
29. Oracle Financial Services Software Ltd.
30. Oriental Bank Of Commerce
31. PTC India Ltd.
32. PVR Ltd.
33. Reliance Communications Ltd.
34. Reliance Naval And Engineering Ltd.
35. Reliance Power Ltd.
36. Repco Home Finance Ltd.
37. Siemens Ltd.
38. SREI Infrastructure Finance Ltd.
39. SRF Ltd.
40. Syndicate Bank
41. The Ramco Cements Ltd.
42. Torrent Power Ltd.
43. TV18 Broadcast Ltd.
44. United Breweries Ltd.
45. V-guard Industries Ltd.
46. Wockhardt Ltd.

https://www.bloombergquint.com/markets/2018/04/23/a-fifth-of-stocks-in-nse-derivatives-segment-to-move-to-physical-settlement-from-july

Does physical settlement on above stocks applicable for future traders who square off before contract expiry?

 

[Pankshri]

Folks,

I don't know why my post was deleted here. Its alright, I am re-posting again. I have written an article which was published by Financial Express about the potential impact of SEBI's move to regulate retail traders' participation in derivatives. If you like what I have written, feel free to share it within your circles. We hope that traders will be empowered rather than discouraged.

https://www.financialexpress.com/mo...vatives-will-impact-retail-investors/1143544/

Nice article and nice initiative Tejas....

 

[soft_trader]

Does physical settlement on above stocks applicable for future traders who square off before contract expiry?

No. It will get cash settled if you squareoff anytime before 3:30pm on expiry day.

 

[vikas2131]

No. It will get cash settled if you squareoff anytime before 3:30pm on expiry day.

In theory yes but practically volume will dip in these shares so it is better to stay away from these stocks..

 

[Tejas Khoday]

Nice article and nice initiative Tejas....

Thanks @Pankshri.

 

[headstrong007]

• SEBI said the physical settlement was necessary to balance cash and derivative market volumes.
  
• SEBI said they want to introduce the Physical Settlement norm in a 'Phased Manner'. So step by step more stocks will be included.
• 46 stocks out of The 208 stocks on the NSE derivatives is just the beginning.

• The physical settlement is the easiest way for SEBI, to cut retailers participation in F&O.

 

[kainiteh]

• SEBI said the physical settlement was necessary to balance cash and derivative market volumes.
  
• SEBI said they want to introduce the Physical Settlement norm in a 'Phased Manner'. So step by step more stocks will be included.
• 46 stocks out of The 208 stocks on the NSE derivatives is just the beginning.

• The physical settlement is the easiest way for SEBI, to cut retailers participation in F&O.

Please explain how it’ll affects intraday trading??



Sent from my iPhone using Tapatalk

 

[vikas2131]

• SEBI said the physical settlement was necessary to balance cash and derivative market volumes.
  
• SEBI said they want to introduce the Physical Settlement norm in a 'Phased Manner'. So step by step more stocks will be included.
• 46 stocks out of The 208 stocks on the NSE derivatives is just the beginning.

• The physical settlement is the easiest way for SEBI, to cut retailers participation in F&O.

i feel they are testing waters to see how would traders and investors react. If it works out fine, they will go ahead and introduce it in more stocks . I guess except nifty 50 stocks where fii has most of its holdings, one could expect all other stocks derivatives to physically settled .

 

[headstrong007]

Please explain how it’ll affects intraday trading??
Sent from my iPhone using Tapatalk

F&O volumes will be dried up. Intraday traders will face wider bid-ask the difference.

Many option writers would skip such stocks due to physical settlement, so intraday option traders will face more heat --> liquidity problem.

Breakeven and impact cost will be higher. The final result might be the complete shutdown of such low liquid stocks from F&O as they will fail to meet min volume/turnover, new strict rule by SEBI. Within next few years, we will see the actual ill effects. SEBI simply want to kick out as many stocks as possible from Derivative Segment.