 "Sebi mandates risk disclosures for F&O trades, to protect retail investor")
Come July, all stock brokers in the country will have to display on their website the risk disclosures related to trading in the equity futures and options (F&O) segment.
Industry experts say this is part of a series of measures planned by Sebi to warn individual investors about the risk associated with derivatives trading.
“While investors are expected to make investment decisions based on their own due diligence and risk appetite, it is important to empower them with detailed information about the risks associated with trading in derivatives,” Sebi has said in a circular.
The risk disclosures will have to be displayed prominently, covering at least half the screen. Further, the newly categorised 15 qualified stock brokers (QSBs) will have to maintain the profit and loss (P&L) data of their clients on a continuous basis and retain it for at least five years.
The 15 QSBs are the systematically prominent stock brokers like Zerodha, 5paisa, Angel One, among others, who manage the trades for the majority of the stock market investors and traders. The format specified by Sebi for these QSBs for data collection includes details like age, income, city, gender, products traded, transaction charges and other information.
Upon login, the trading clients will be prompted to read these disclosures and allowed to proceed only on acknowledging the same.
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The risk disclosure pop-up will show details from the Sebi study with statements like loss makers registering net trading loss close to Rs 50,000, profit makers incurring 15-50 per cent of the profit as transaction cost, and that loss makers expend an additional 28 per cent of the net trading losses as transaction costs.
A study published by Sebi in January showed that only one in 10 F&O traders turned out to be profitable during FY22.