Sebi's Rs 62 Crore Investment: Educating Investors on F&O Risks & Volatility

The capital markets regulator Sebi has spent over Rs 62 crore in the past five years on investors' education activities regarding the Futures & Options (F&O) segment. Measures include mandatory risk disclosure documents, extensive awareness programs, and educational digital platforms. Last week, the securities transaction tax on F&O trade was raised.

Capital markets regulator Sebi has invested more than Rs 62 crore in the last five years for educating investors about risks and volatility in the Futures & Options (F&O) segment, Parliament was informed on Tuesday.

From its Investor Protection and Education Fund (IPEF), Sebi allocated Rs 2.73 crore in FY 2023-24, Rs 11.93 crore in FY23, Rs 6.81 crore in FY22, Rs 28.84 crore in FY21, and Rs 11.84 crore in FY20, according to Minister of State for Finance Pankaj Chaudhary's written reply to the Rajya Sabha.

Sebi, along with Market Infrastructure Institutions (MIIs), conducts various programs to raise awareness about the risks associated with the F&O segment. These include statutory warnings on broker trading screens and dissemination of educational videos on social media platforms.

As part of the account opening process, clients must sign a Risk Disclosure Document (RDD) detailing various risks related to F&O trading, such as market volatility, liquidity, and systemic risks. Sebi also conducted 43,826 investor awareness programs in 687 districts during 2023-24.

Adding to its digital repertoire, Sebi's website and the Saa₹thi App aim to spread investment awareness, emphasizing risks in the F&O market.

Futures and Options trading involves contracts derived from underlying assets like stocks or commodities. While futures contracts necessitate transactions at set future dates and prices, options offer rights without obligations.

The use of these financial instruments for hedging, speculation, and arbitrage carries significant risks, including leverage and market volatility, capable of causing substantial losses.

In a recent move, Finance Minister Nirmala Sithraman raised the securities transaction tax (STT) on F&O trades starting October 1 to address concerns regarding hyperactive interest in derivatives.

(With inputs from agencies.)