Dear SEBI team,

I am writing this petition to express my concern regarding SEBI's recent proposal to increase the F&O lot size from the existing range of Rs. 5-7.5 lakhs to Rs. 20-25 lakhs per lot. This significant increase will adversely affect the participation of retail investors, particularly educated individuals who are keen to invest and participate in the Cash & F&O market.

I urge SEBI to consider reducing the F&O lot size to Rs. 2-3 lakhs instead, for the following reasons:

1. Analogy of Car Driving Training and Licensing: Just as the government does not ban driving to prevent accidents but focuses on training and licensing drivers, SEBI should not distance small investors from the markets. Instead, focus on educating and training them about market risks.
2. Prevention and Cure Approach: Similar to how the government handles the sale of tobacco and alcohol by focusing on prevention and treatment rather than outright bans, SEBI should adopt a strategy that promotes education and awareness about trading risks rather than restricting access.
3. Moderation in Market Participation: Increasing the lot size is akin to a parent who allows unrestricted use of mobile phones and then completely bans them. A balanced approach would be to permit moderate use under supervision, ensuring that retail investors can benefit from the market while being well-informed and cautious.
4. Educational and Certification Requirements: Instead of restricting market participation to High Net Worth Individuals (HNIs) alone, SEBI should mandate certifications like NISM or NCFM for those wishing to trade in F&O. This would ensure that only knowledgeable and qualified individuals participate, reducing the risk of uninformed losses.
5. Wider Participation for Market Development: Reducing the lot size from Rs. 7.5-10 lakhs to Rs. 2-3 lakhs would enable more small investors to participate in the market. This inclusive approach is crucial for the growth and development of India's capital markets.
6. Protecting Small Investors: Small retail investors often have smaller portfolios and need tools like futures and options for portfolio insurance. Increasing the lot size would deprive them of this essential risk management strategy. It's comparable to allowing only those with high-value homes (say Rs. 2 Crore or more) to purchase home insurance, which is unreasonable and unconstitutional.
7. Preventing Unregulated Trading: An increase in lot size may drive retail investors to unregulated trading avenues, such as 'dabba trading,' or push them towards international markets. This would undermine SEBI's regulatory efforts and market integrity.  Furthermore, I would like to highlight the following points:

• Constitutional Right to Equality: Don't take away every Indian's constitutional right to equality by making market participation accessible only to the wealthy.
• Effective Solutions: Please cure the disease instead of killing the patient. Educate and train investors rather than barring them from participating.
• Rational Decision-Making: Please don't take irrational decisions just in the name of protecting retail investors. Implement measures that genuinely address the root causes of issues.
• Combined Stock Strategies: When the lot size is increased, how can small retail investors execute safer stock combined strategies like covered calls or cash-secured puts?
• Requesting SEBI Not to Increase Lot Size: Requesting SEBI not to increase F&O lot size, as it is already on the higher side. A few years ago, you decreased the lot size for the sake of wider participation in the market. Now you are doing the reverse just to curb excessive speculative trading in the markets.
• Compulsory Education: Make it compulsory for retail participants to learn specified courses and pass exams, then allow them to trade in F&O. There can be many levels just like in the developed countries like US.
• Analogy of a Concerned Father: It is like a father who first allows his child to play with a mobile all day (allowing every day expiry) and now is so concerned that he takes away the mobile forever, depriving the child from the benefits of moderate mobile use. Please, SEBI, don’t become such a father.
   

In conclusion, I respectfully request SEBI to reconsider the proposal to increase the F&O lot size. Instead, adopt measures that promote wider participation, education, and responsible trading practices. Such an approach will not only protect retail investors but also contribute to a more robust and inclusive capital market in India.

Thank you for considering my petition.

Yours sincerely,

Pawan Kabra