Friday , September 20 2024

Brokers should warn derivatives traders about the risks: Sebi

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The circular issued by SEBI on January 25, 2023 emphasized on giving detailed information about the risks involved in trading in the derivatives segment. SEBI pointed this out as more and more investors are participating in the futures and options segment of the Indian stock market. According to a study conducted by SEBI on net losses in the A&O segment, nine out of 10 individual traders have reported net losses. Such traders earn on an average Rs. 50,000 loss, shows a study by SEBI. Apart from this, there was also a loss of transaction cost. Due to which their net trade deficit increased by 28 percent. While those showing net trading profit spent 15 per cent to 50 per cent of their profit on transaction costs. All stock brokers now have ‘Risk Disclosure’ on their websites for investor awareness. It has to be displayed and provided to all its customers.

Clients should read the Risk Disclosure when logging in to trading accounts. Which can be seen as a pop-up window. Once the client has read and confirmed it, he can proceed. It is mandatory to display these exposure disclosures covering at least 50 per cent of the screen area, Sebi’s circular said. Further Qualified Stock Brokers (QSBs) have also been directed to maintain Profit and Loss (P&L) data of their clients at all times. P&L data should be maintained for at least five years. Stock exchanges and depositories have been asked to inform their members and participants about these provisions and publish the circular on their websites. Brokers are required to display risk disclosures on their respective websites.