SEBI Panel May Ask Retail F&O Traders To Prove Suitability — Profit Exclusive

The Secondary Market Advisory Committee of the market regulator SEBI may soon discuss bringing a suitability exercise for the retail F&O investors, as per people in the know. While this is on the committee agenda, the proposals have not been taken up yet, but are likely to be discussed soon, NDTV Profit was told.The idea here is to identify if a particular trader wishing to engage in F&O trading has enough funds and knowledge about the risks to enter this segment. Furthermore, likely, an examination to test the suitability could also be introduced for retail investors and the brokerages would be on the frontline to oversee who is eligible.Another benefit of introducing such an exercise is that it would also help in curing the F&O volumes, sources said. It is important to note that SEBI came out with the proposals to curb F&O volumes last year, the direct result was that exchanges and brokers faced a revenue drop, as derivative trading volumes dropped.The market regulator, on Oct. 1, 2024, issued a circular outlining the curbs for the futures and options trading segment. In an attempt to protect small investors and household wealth from hefty losses, the regulator has brought key regulations, including the limitation of weekly option expiries to one per exchange, along with a mandate requiring buyers to pay premiums upfront..SEBI Changes F&O Game, Says Capitalmind's Deepak Shenoy Decoding New Framework.The exchanges are also required to monitor intraday positions at least four times daily and impose penalties for intraday limit breaches just like the end-of-day penalties.The minimum contract value for index derivatives has also been raised to Rs 15 lakh, reflecting an effort to increase trading standards and efficiency.Additionally, the regulator, on Feb. 25, 2025, also proposed a shift to a ‘Future Equivalent’ method of calculating open interest (OI) in the equity derivatives market. This is being suggested in place of a notional value-based method of calculation of IO, to prevent the stocks from being manipulated and pushed into a ban period. .SEBI Committee Approves Ease In Short-Selling Norms, Draft Circular To Be Out Soon: Sources.“These changes will not materially affect small investors beyond reducing the frequency of stocks entering the ban period, thereby simplifying their trading experience,” the paper read.SEBI also proposed tightening the eligibility criteria for derivatives on non-benchmark indices. Currently, many sectoral and thematic indices have a few dominant stocks that can lead to excessive concentration of risk. Under the new proposal, any non-benchmark index will need to have at least 14 stocks, with no single stock exceeding 20% weightage. The top three stocks together cannot have more than 45% weightage, and all other stocks must have decreasing weights. This rule will ensure that index derivatives remain diversified and less prone to manipulation..SEBI Board Meet: UPI-like Demat Protections, Clear Corps' Independence, & More On Agenda

SEBI Panel May Ask Retail F&O Traders To Prove Suitability — Profit Exclusive

Along with ensuring that a trader has enough funds and knowledge to trade in derivatives, the market regulator may also launch an examination to test their suitability.

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