SEBI Considers Investor Suitability Rules for Derivatives Trading

India’s markets regulator, the Securities and Exchange Board of India (SEBI), is exploring the introduction of investor suitability criteria for derivatives trading. The proposed rules may link eligibility to a trader’s exposure in the equity markets, according to sources familiar with the matter.

Equity Exposure Could Be a Key Benchmark

SEBI is reportedly assessing both direct and indirect equity holdings as a benchmark for determining who can access futures and options (F&O). Exposure through cash equities, equity mutual funds, and portfolio management services (PMS) may also be considered when framing the criteria.

Before finalising any guidelines, SEBI is likely to consult stock exchanges to gather input on the proposed framework. A consultation paper outlining suggested suitability norms for derivatives trading may be issued, CNBC TV-18 reported.

Also Read: SEBI Introduced SWAGAT-FI for FPI’s and FVCI’s Entry into Indian Market

Retail Participation and Losses Spark Concern

The move comes amid rising concerns over speculative retail participation in F&O markets, where turnover has surged in recent years. Latest data shows that individual traders lost over ₹1 lakh crore in FY25, with nearly 91% of retail participants posting losses in the segment. These figures have prompted renewed scrutiny of market dynamics, trading access, and potential regulatory tightening.

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