Market regulator Security and Exchange Board of India plans to introduce new derivative products like lower-value contracts on individual stocks in the domestic derivative market in a bid to encourage retail investors in the option and future market.

The derivatives market review committee has recommended mini contract that would be fourth or a tenth in size of a normal derivative contract besides some measures to increase participation and liquidity in the market. Currently, the minimum contract value of mini-derivative contracts stands at Rs 1,00,000 against 2,00,000 for normal contracts.

SEBI's Derivatives Market Review Committee, comprising ISB dean Rammohan Rao, Prakash G Apte, Nachiket Mor, Chitra Ramakrishna, Deena Mehta and Dr Sanjeevan Kapshe, also warns small investors against pro-active participation in the future market.

The panel report said, "They should carefully consider taking positions on future markets because mark-to-market losses resulting in margin calls could wipe out small individual investors."

SEBI's panel also recommend increase in tenure of longer-term options up to three years to attract more investors and bring transparency in the system. The penal is also in the favour of cross currency contracts besides formation of corporate bond and Government bond indexes.

The panel has also asked for relaxing terms and conditions of the Securities Transaction Tax to make derivative market more convenient for new investors.