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

[headstrong007]

discount brokers already made big,they dont need us anymore,Zerodha literally stopped answering all questions.

That's is the different issue, Zerodha has achieved a big client base now so stopped answering all question here.

But, all discount brokers will lose such hard-earned client base very quickly with such strict regulation. They need to act to protect their own interest now.
Most of the clients trading F&O are with under 1 lakh capital, Zerodha said it.

 

[trader2017]

@Vitthala : hey are you on tradingqna too dude?

 

[headstrong007]

The market can see a huge sell-off and goes into hibernation for next 4-5 years or more(just like the South Korean market, can see the charts) until such regulation is removed due to lack of interest from trading or investing community.

It's time to book profit from mutual funds and remain in cash as much as possible.

Frankly speaking, the future of our market looks uncertain with the possible effect of strict regulation.

The general public will lose the interest in SIP quickly if the market goes into hibernation for few years. Soon, there will be popular sentiment 'Yeh Mutual Fund Shai Nahi Hai'.

SEBI and all their associates behind the scene including the Mutual funds must remember the famous story of "The Golden Goose".

 

[Vitthala]

Networth doesnt mean your car,your flat
you are not going to sell out your car/gold/flat and putting that amount with a broker
if you have FD worth 30L in few banks then thats your networth

if thats not the case then anyone can submit networth as everyone has some flat or farm or something whose market value is 30L++

 

[headstrong007]

Networth doesnt mean your car,your flat
you are not going to sell out your car/gold/flat and putting that amount with a broker
if you have FD worth 30L in few banks then thats your networth

if thats not the case then anyone can submit networth as everyone has some flat or farm or something whose market value is 30L++

Actually, net-worth is two type:- liquid net worth and illiquid networth.
Here in trading purpose, only liquid networth is considered. Unfortunately, most of the small retailer traders have no idea about it as they are not used to such terms yet.

Liquid Networth- The part of an individual's net worth that can be readily turned into cash.
Liquid net worth includes investments such as stocks and mutual funds, FD, but does not include assets that are difficult to readily convert, such as real estate or cars etc.

*************
And there was the report already published that the maximum exposure will be limited to only 40-50% of the networth. So, I am not really sure what liquid net-worth is required to trade just one lot Bank Nifty Future! If anyone has a clear idea share your view.

Even for big volume traders, such regulation is very dangerous to manage the risk using position size. They can't increase the position size when they required (when there is networth based additional restriction) . This is dangerous for risk management for big volume traders too. They will automatically drop volumes.

Derivative trading is also known for margin trading. We just need only span + exposure money as we are just taking the short-term position on 1-2-3 month contracts. So, SEBI can't demand full margin, but they can easily set min capital required for F&O trading like 5 lakh (which will kick out most of the F&O traders out of the market unless Court finds it is inappropriate and against free market).

 

[vikas2131]

Actually, net-worth is two type:- liquid net worth and illiquid networth.
Here in trading purpose, only liquid networth is considered. Unfortunately, most of the small retailer traders have no idea about it as they are not used to such terms yet.

Liquid Networth- The part of an individual's net worth that can be readily turned into cash.
Liquid net worth includes investments such as stocks and mutual funds, FD, but does not include assets that are difficult to readily convert, such as real estate or cars etc.

*************
And there was the report already published that the maximum exposure will be limited to only 40-50% of the networth. So, I am not really sure what liquid net-worth is required to trade just one lot Bank Nifty Future! If anyone has a clear idea share your view.
Even for big volume traders, such regulation is very dangerous to manage the risk using position size. They can't increase the position size when they required. This is dangerous for risk management for big volume traders too. They will automatically drop volumes.

if they are going to limit exposure 50 % of net worth then in my opinion , initial margin will be considered as exposure not the whole contract value.

 

[hitesh05]

I think and hope this is a false news, SEBI cant take such hard rules to apply suddenly on market

 

[headstrong007]

if they are going to limit exposure 50 % of net worth then in my opinion , initial margin will be considered as exposure not the whole contract value.

I think so, as there is already a report that some SEBI official said exposure is only 40-50% of networth.
But, my fear is not my trading capital but the possible liquidity crisis,
if SEBI set even min capital required for F&O trading to say, at least 5 lakh capital (which is very much likely). Then most of the F&O participant is out of the market. Option segment will be dead first then the futures will follow soon, then the rest of the market(equity cash).

 

[headstrong007]

I think and hope this is a false news, SEBI cant take such hard rules to apply suddenly on market

"Governments never learn. Only people learn." - Milton Friedman

"Only two things are infinite, the universe and human stupidity, and I'm not sure about the former." - Albert Einstein

 

[hitesh05]

will it be possible to trade intraday with cash?