New Delhi October 11 2024: An increasing “gambling mindset” drew the ire of India’s securities market regulators last week, with the Securities and Exchange Board of India (SEBI) introducing new rules to curb speculative retail trading in derivatives.
Millions of inexperienced investors, influenced by social media “finfluencers” among other inducements, and lured by discount brokers, have been flocking to high-risk options trading in the Indian market in recent years, according to an article in the Financial Times.
Although the SEBI’s action is specific to the Indian securities market, it reflects a larger concern with which market regulators worldwide are grappling, namely the increasing risk to investors posed by the “retailization” and democratization of securities investing—the gamification of investing and the role of finfluencers. It’s an issue that aligns with the core focus of CFA Institute on investor protection.
The new regulations, which SEBI introduced after issuing several prior warnings to the market about the risks involved in derivatives markets, include a significant hike in the minimum contract size for index derivatives and limits on weekly options contracts. These measures are aimed at protecting these investors after SEBI data showed that more than 90% of them have suffered losses and most of them are young and inexperienced investors, not having seen market cycles and economic volatility.
