Securities and Exchange Board of India (SEBI) addresses media speculation concerning the curbing of retail participation in derivative markets. In a recent statement, SEBI clarifies its stance on the matter and emphasizes its focus on ease of compliance, risk management, and the welfare of brokers and investors.
: SEBI refutes the claims of seeking to curb retail participation in derivative markets. The existing circular from 2009 requires stockbrokers to verify clients’ financial capability for trading in the derivative segment. SEBI is currently evaluating the possibility of making this circular applicable based on clients’ risk assessment to promote ease of compliance for brokers and investors. The objective remains to balance risk management and ease of doing business, without imposing restrictions on trading activities. SEBI Press release is reproduced below:
Securities and Exchange Board of India
SEBI at an early stage of considering simplification of the process of on-boarding of clients by adoption of risk based approach
Press Release No.14/2023
This is with reference to some media articles speculating that SEBI is seeking to curb retail participation in derivative markets.
In this regard, it is clarified that there is no proposal to curb retail participation in derivative markets.
Currently, for trading in the derivative segment, SEBI Circular dated December 03, 2009 (now incorporated under Master Circular for Stock Brokers dated May 17, 2023), inter alia, prescribes that the stock broker shall have documentary evidence of financial capability for all clients.
SEBI, in line with the objective of ease of doing business, is at an early stage of evaluating if the aforesaid circular can be made applicable based on risk assessment of the clients. This would promote ease of compliance for brokers and investors. Further, 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.
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.
Mumbai
July 29, 2023
