PTI New Delhi

Markets regulator Sebi Chief Tuhin Kanta Pandey has ruled out the possibility of an aptitude test for retail traders wanting to participates in the F&O segment, saying it is impractical and prone to regulatory overreach.

Sebi had earlier introduced measures in November last year in a bid to curb excess speculation in derivatives. These regulatory steps came in the wake of a Sebi study that revealed a staggering 9 out of 10 retail investors lose money while trading in F&O instruments.

When asked about the industry’s suggestion of introducing tests for retail investors before permitting them to trade in risky derivative products, Pandey clarified the regulator's stance. “Right now, we aren't really considering any of those things.” He explained the concerns of practicality and effectiveness behind such proposals. “Number one, we have to also see, will it be a regulatory overreach? Will you be able to effectively do it?, he told PTI in an exclusive interview.

He clarified, Sebi already has certification mechanisms for specific market participants. "I mean, we do have for specific players, those who are registered with the system, we do have this. Like for example, NISM certification is there for several. Like you are a registered advisor or an IA or RA." But applying this to millions of retail traders would be a different challenge altogether.

‘Sufficient checks,  balances there to tackle frauds’

India has sufficient checks and balances to tackle frauds, and nobody should have the impression that “systems are not working” whenever any scam comes to light. Sebi chief said generally there is a tendency to be influenced by anecdotal evidence and form perceptions on frauds without going into the statistics. 

“There are checks and balances happening; the exchanges are first line regulators, a lot of disclosures are happening, a lot of auditors are doing their job. So let us not think that... the systems are really not working,” Pandey told PTI in an interview.