A recent proposal made by the regulatory has stated that a hike is to be made in the entry bar of the market for equities and trading. This will help the individual investors and the investors who make less investment to be prevented from higher risks in the market. But the market people and critics say that this hike of entry bar price will definitely have a worse impact on the market which will not only affect the people who invest less, but also some rich investors. This will kill the volume of the market by restricting the market into institutions.
The Security and Exchange Board of India, also known as SEBI, has made a proposal for raising the minimum size of the contract for Index Derivatives and Stocks to be either Rs. 5 lakh or Rs. 10 lakh. The current contract size is Rs. 2 lakh. SEBI recently wrote to the Stock Exchange asking to give a review about the consideration being implemented and the after effects of the hike in the stock market. The review regarding the implementation of hike has made a clear point that, the NSE will have the worst impact that will ruin the smaller investors and individuals and will let them quit the market.
Liquidity Will Impact the Market
The National Stock Exchange and the MCX-SX are against the SEBI’s proposal, whereas the Bombay Stock Exchange (BSE) has given a review in favor of the proposal. The biggest challenge that will be faced by the market will be liquidity, which will be an initiator for increase in trading cost. Hence, it will be influencing the cash market to go bad. An official told that the proposal will make more retail investors to go out of the market and will initiate the illegal ‘dabba’ which is also known as off-market dealing. This surely will affect the cash market.
The estimations about the Indian stock market say that more than half of the market activity and the investors are focused towards the investments below Rs. 5 lakh. Hence a raise in the entry bar above of equal to Rs 5 lakh will definitely let no chance for these investors. Vikas Khermani who is the co-head and president of wholesale capital market at Edelweiss has made a point that the current size of the contract price is doing well; increasing the entry bar will discourage the participation of retailers he added. The idea of increment should not make the market difficult but should create awareness.
In the last 15 years, SEBI has never ever proposed a hike in contract size. SEBI previously has discontinued the mini futures. The contract options are also discontinued as a part of bid dissuading.
The Security and Exchange Board of India, also known as SEBI, has made a proposal for raising the minimum size of the contract for Index Derivatives and Stocks to be either Rs. 5 lakh or Rs. 10 lakh. The current contract size is Rs. 2 lakh. SEBI recently wrote to the Stock Exchange asking to give a review about the consideration being implemented and the after effects of the hike in the stock market. The review regarding the implementation of hike has made a clear point that, the NSE will have the worst impact that will ruin the smaller investors and individuals and will let them quit the market.
Liquidity Will Impact the Market
The National Stock Exchange and the MCX-SX are against the SEBI’s proposal, whereas the Bombay Stock Exchange (BSE) has given a review in favor of the proposal. The biggest challenge that will be faced by the market will be liquidity, which will be an initiator for increase in trading cost. Hence, it will be influencing the cash market to go bad. An official told that the proposal will make more retail investors to go out of the market and will initiate the illegal ‘dabba’ which is also known as off-market dealing. This surely will affect the cash market.
The estimations about the Indian stock market say that more than half of the market activity and the investors are focused towards the investments below Rs. 5 lakh. Hence a raise in the entry bar above of equal to Rs 5 lakh will definitely let no chance for these investors. Vikas Khermani who is the co-head and president of wholesale capital market at Edelweiss has made a point that the current size of the contract price is doing well; increasing the entry bar will discourage the participation of retailers he added. The idea of increment should not make the market difficult but should create awareness.
In the last 15 years, SEBI has never ever proposed a hike in contract size. SEBI previously has discontinued the mini futures. The contract options are also discontinued as a part of bid dissuading.