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Investor Risk Reduction Access Platform (IRRA)

By Amigos IAS

Why is it in the news?

  • IRRA is a new platform launched by the Securities and Exchange Board of India (SEBI).

 

About Investor Risk Reduction Access Platform (IRRA)

  • It is designed to function as a safety net for investors and traders participating in the Indian financial markets.
  • The platform has been jointly developed by all the major stock exchanges in India, including the Bombay Stock Exchange (BSE), National Stock Exchange (NSE), and Metropolitan Stock Exchange of India.
  • Its primary purpose is to mitigate risks that may arise when a trading member or stock broker registered with SEBI encounters technological difficulties during trading operations.
  • IRRA is primarily focused on facilitating the cancellation of pending orders in the event of technological glitches or trading interruptions. This is aimed at preventing unintended transactions or losses for investors.
  • The IRRA platform is accessible to trading members who support internet-based trading (IBT) and wireless technology for their investors. However, it is not accessible for algo trading (algorithmic trading) and institutional clients, indicating its primary utility for retail investors and traders.

 

Futures and Options (F&O) Trading

·       F&O trading is a type of financial derivatives trading that involves contracts based on the future prices of underlying assets.

·       These underlying assets can include various financial instruments like stocks, commodities, currencies, or indices.

·       F&O trading involves two primary types of derivative contracts: futures contracts and options contracts.

·       Futures contracts obligate the buyer to purchase and the seller to sell a specific quantity of an underlying asset at a predetermined price and date in the future.

·       Options contracts provide the buyer with the right (but not the obligation) to buy (call option) or sell (put option) an underlying asset at a predetermined price (strike price) on or before a specified expiration date.

·       F&O trading allows traders to control a more significant amount of the underlying asset with a relatively small amount of capital. This leverage can amplify both potential gains and losses.

·       While it offers opportunities for hedging and speculation, it also involves a higher level of risk compared to traditional equity trading.

 

Securities and Exchange Board of India (SEBI)

·       SEBI is a statutory authority in India responsible for regulating and supervising securities and financial markets.

·       It plays a crucial role in ensuring the fair and transparent functioning of various segments of the financial market, including stock exchanges, mutual funds, securities intermediaries, and credit rating agencies.

·       SEBI formulates policies, rules, and regulations to govern these entities and maintain market integrity.

·       It also mandates the registration and regulation of market intermediaries, such as brokers, sub-brokers, merchant bankers, and portfolio managers.

·       SEBI enforces disclosure requirements related to financial results, corporate governance, and insider trading to enhance transparency and protect investor interests in the financial markets.

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