However, he stated that more targeted guardrails might be needed to protect individual investors. “One kind of tightening which we can look at is a product suitability test, depending on the risk appetite of the customer… I think that would be a good thing we can look upon.” Rathi suggested that such a framework could use investor net worth and declared risk preferences to decide eligibility for derivatives trading. “At an initial stage, at a lesser level… at a later stage maybe at a higher level,” he said, stating it would allow retail investors to acknowledge and accept their risk profile before entering the F&O market.
Seth echoed the sentiment that the regulator’s recent study should act as a wake-up call. “A lot of the tightening and structural reforms that the regulator wanted to put in place were already put in place,” he said, observing that while volumes had dipped post-implementation, “if you look at it from the last two years’ perspective, it’s higher.”
He emphasised that brokers and platforms have a significant role in investor awareness. “It is for you to self-realise that, like, is this working for you? What is the level of skill you have?” Seth noted that 5paisa and peers have implemented pop-ups at login, reminding users of F&O risks. “You know those six-seven points… nine out of ten people lose money and so on,” he said, but questioned whether such disclosures alone drive real behavioural change.
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When asked about reports that SEBI may move from weekly to fortnightly expiries to curb speculation, Seth remarked, “It could have an impact… it could have an impact on the volumes in this segment,” though he added that over time, markets generally adjust.The discussion also touched upon the recent Jane Street episode, which has raised questions about market abuse and whether sophisticated institutional players might be profiting off retail flows. Rathi pointed out that Jane Street had access to “sophisticated instruments… their appetite to have large money… that is a structural advantage.” He said the regulator may now examine whether “some of the sophisticated traders [are] benefiting out of retail investors.”
Seth highlighted data from SEBI’s report that shows a correlation between trader income and outcomes. “You can’t say that people with high income are necessarily better traders… but the fact is, how much thought you are putting into what you are doing.” He stressed the need for retail investors to introspect, upskill, and treat F&O trading with the seriousness it demands.
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On whether more regulatory changes are likely post the Jane Street incident, Rathi said, “After this episode, there could be some such changes in the derivative [framework],” whether related to expiry structure or product eligibility. Seth added, “You could potentially expect some measures… a lot of the FPIs—the most sophisticated traders on the other side—made a higher percentage of profits versus a normal retail trader.”
For the entire discussion, watch the accompanying video
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