This would promote ease of compliance for brokers and investors,” the regulator said in a release. The clarification comes after news reports on Friday said that SEBI was seeking to curb retail participation in derivative markets. SEBI’s focus has always been on adequate risk management, while ensuring ease of doing business and compliance, rather than on placing any curbs on trading, the regulator said. “It is reiterated that proposals which result in any change in the regulatory framework, go through a process of comprehensive consultation with all stakeholders including the public, before any decision is taken by the Board,” it said.
Retail investor participation in the equity derivatives market has jumped by a whopping 500% in the last three years, according to a study by SEBI. Reuters on Friday reported that the regulator was discussing measures to track and control “disproportionate trading” to safeguard retail investors by linking the value of trades in futures and options to their income and net worth.
SEBI had proposed a revised framework in 2017, but dropped it later as brokers cited difficulties in assessing the net worth of their clients. Current regulations of SEBI requires the stock broker to have documentary evidence of financial details of the clients who opt to deal in the derivative segment. In respect of other clients, the stock broker needs to obtain the documents in accordance with its risk management system. But a recent study by the regulator showed that nine out of 10 equity derivative traders lose money in the market.