SEBI Will Not Curb Retail Participation In Derivative Markets

SEBI clarified that it is only looking into simplification of the client onboarding process for stock brokers, by adoption of a risk-based approach

SEBI has reiterated that the board will not take any decision without consulting with all the stakeholders including the public

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Securities and Exchange Board of India (SEBI) issued a circular on Saturday, stating that the regulator is not looking to change the regulatory framework and is only considering a simplification of stock brokers’ process of onboarding clients.

According to a report by Moneycontrol, the markets watchdog issued a clarification after reports of SEBI planning to curb retail participation in derivatives started floating around. These reports suggested that the regulator will restrict derivatives trading on the basis of investors’ overall wealth. 

In its circular, SEBI clarified that it is only looking into simplification of the client onboarding process for stock brokers, by adoption of a risk-based approach. With respect to the media reports, the regulator said that there is “no proposal to curb retail participation in derivative markets.” The watchdog further added that any regulatory framework changes will go through a detailed review with all the stakeholders, the report said. 

Back in December 2009, SEBI had instructed stockbrokers, on the onboarding process, documentation and other details, with regards to the clients. It required the brokers to maintain documentary evidence of the financial health of all clients. 

“The stock broker shall have documentary evidence of financial details provided by the clients who opt to deal in the derivative segment. In respect of other clients, the stock broker shall obtain the documents in accordance with its risk management system,” SEBI had said via its circular. 

This requirement is under reconsideration to make compliance easier. The latest circular said, “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.” 

SEBI has reiterated that the board will not take any decision without consulting with all the stakeholders including the public.