The markets regulator Sebi decided to create a risk disclosure framework for individual traders with respect to trading in the equity Futures & Options (F&O) segment in order to help investors make well-informed decisions
All stock brokers will be required, under the new system, to disclose risks to clients and to display those disclosures on their websites.
Clients may be requested to read the “risk disclosures” when logging into their trading accounts with brokers. This prompt may come in the form of a pop-up window. Clients would only be permitted to continue after acknowledging the disclosures. Additionally, such disclosures must to be presented prominently, taking up at least 50% of the screen.
Investor engagement in the Indian securities market, particularly the derivatives sector, has expanded, according to Sebi.
“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,” the statement continued.
Additionally, it has been mandated that all Qualified Stock Brokers (QSBs) continuously retain their clients’ Profit and Loss (P&L) data. Such client information must be kept on file for at least five years.The risk disclosures must be visible on the websites of the stock exchanges and depositories, along with a link to a Sebi research.
Nine out of ten individual traders in the equities F&O segment experienced net losses in the financial year 2021–2022 with an average loss of Rs. 1.1 lakh, according to a survey done by Sebi in January.
As compared to this, just 11% of individual traders in the equities F&O category were profitable in FY22, with an average profit of Rs. 1.5 lakh.