F&O trading can't be a national pastime; SME IPO practices pretty disturbing: Sebi member

Mumbai: India cannot afford to make futures and options trading into a 'national pastime', Sebi whole-time member Ashwani Bhatia said on Tuesday, urging investors to be more serious.

Speaking at an event organised by Morningstar here, Bhatia rued that investors are protesting against the latest moves to curb activity in the F&O Segment initiated by Sebi.

The markets watchdog's study has revealed that 93 per cent of the trades result in a loss for retail investors, and Bhatia said it is the institutional investors who are making money in the process.

"F&O cannot be and should not be a national pastime which actually means that savings of retail participants move into the pockets of institutional hands," he said, asking investors to do "serious investing".

He said India is home to more than half of the global derivative volumes, making it the largest base for such bets globally, and made it clear that this is a "crown we do not wish to wear". "... uneasy lies the head that wears a crown," he said, describing India's not-so-envious position.

Bhatia said the number of retail investors has grown significantly since the onset of the pandemic in 2020 as seen in the growth of demat accounts, but flagged retail play in the F&O segment as a "matter of concern".

Admitting that this signifies growing confidence amongst individual investors, it also necessitates caution and the need for continuous investor education.

Pointing to recent measures like increasing the minimum contract size to Rs 15 lakhs, reducing expiries per week, and implementing an upfront options premium collection from 2025, Bhatia went public with his disappointment pointing out that investors are protesting against the moves initiated to safeguard their own interest.

Sebi has tightened the margin requirements for trading in the F&O segment. This could lead to a more cautious approach and will ensure that retail investors have enough capital to absorb losses, thereby reducing leverage, he said.

In the speech, the Sebi WTM also flagged Sebi's concerns with the SME IPO space, pointing out that the regulator and exchanges are monitoring the field for irrational exuberance, price manipulation or fraudulent trade practices. The regulator will soon be coming out with a discussion paper on the same, he said.

"What we have seen is pretty disturbing. The way retail participation is happening, the number of times IPO issues are oversubscribed, the way market making happens, the way underwriting happens and obviously we do not feel very comfortable about what is going on," Bhatia said.

It can be noted that a few months ago, Sebi chairperson Madhabi Puri Buch voiced concerns on the price manipulation front in SME IPOs.