Zerodha CEO Nithin Kamath issued a warning today in response to rumors that the National Stock Exchange (NSE) plans to extend F&O trading hours. As a result, retail investors may suffer losses.
“In the long run, I’m unsure how it will affect the mental health of active retail F&O traders.” Long hours of P&L tracking can be stressful and have an impact on life outside of trading. Also, active traders lose money, mostly because they trade too much. This can be made worse by working longer hours,” Kamath said on Twitter.
According to the billionaire broker based in Bengaluru, extended trading hours for F&O will indicate our markets’ maturity. He added that they are also good for capital markets businesses in terms of revenue and level the playing field for domestic traders against international traders.
“I’m not sure if retail investors will do better, but it could boost revenues for the capital markets business in the short term. In the long run, this may result in lower participation and liquidity, which will affect everyone,” Kamath stated.
Rumors circulated earlier this month that the NSE is preparing to extend market trading hours for the equity and derivatives segments. However, neither the stock exchange nor Sebi, the market regulator, has made an official announcement.
A report from Sebi that was released a month ago suggested that 9 out of 10 individual traders in the equity F&O segment experienced losses during the fiscal years 2021 and 2022.
Based on a sample of all individual clients of the top ten stock brokers, the report found that 89% of individual derivative traders have lost capital, with an average loss of around Rs 1.1 lakh, even though the number of F&O traders on Dalal Street has increased by 5000% in just three years.
During FY22, 98% of all individual traders in the equity F&O segment traded options, while 11% traded futures, compared to 43% and 89%, respectively, in FY19.