Brokers’ association ANMI stresses on need to reform retail participation in Equity F&O

Brokers’ Association ANMI Stresses Need to Reform Retail Participation in Equity F&O

Leading stock brokers' association, the Association of National Exchanges Members of India (ANMI), is advocating for reforms in retail participation in equity F&O, where over 90 percent of traders continue to incur losses despite recent safeguards. ANMI suggests strengthening eligibility norms, position limits, risk management frameworks, and investor protection measures to ensure responsible and sustainable participation.

ANMI President K Suresh said, “Without knowledge of F&O, retail investors should not trade.” He further added, “Wealth creation can happen only in the cash market, not in F&O.”

When asked whether the entry barrier should be based solely on education or also include net worth criteria, Suresh said, “We all need to study what global practices are, and we will then suggest a plan to the regulator.”

Sebi, in a study published on July 7, said the number of unique individual investors trading in F&O is down by 20 percent compared to the previous year, but it’s up by 24 percent compared to two years ago. In the study, it is seen that traders with total turnover less than Rs 1 lakh witnessed the highest degrowth compared to the previous year. The same bucket witnessed the highest increase in unique investors in F&O compared to two years ago.

The study indicates that the net losses of individual traders widened by 41 percent to Rs 1,05,603 crore in FY25 from Rs 74,812 crore in FY24, after accounting for transaction costs. The percentage of traders making losses in F&O remained broadly unchanged at 91 percent or 9 out of 10 investors, from the earlier study done by Sebi.

In addition to retail F&O reforms, ANMI is planning to pitch a five-point reform manifesto to the Securities and Exchange Board of India (SEBI), aimed at strengthening and modernizing the Indian financial ecosystem. The agenda includes deepening the cash market through expanded single stock derivatives, building a robust Securities Lending and Borrowing (SLB) ecosystem, reviving currency derivatives with unified regulatory support, ensuring parity by allowing co-location in commodity markets, and introducing fixed income index derivatives.

On deepening the cash market, ANMI recommends widening the universe of stocks eligible for derivatives trading. India currently maintains some of the most restrictive eligibility norms globally, with only a limited set of stocks qualifying for F&O. ANMI notes that international markets allow 70–80 percent of traded stocks to be part of the derivatives segment. The association claims that global and domestic studies show introducing single stock options leads to an 80–120 percent increase in cash market volumes. Expanding the derivatives basket will not only boost retail and institutional participation but also improve overall market depth and resilience.

Regarding the development of a robust SLB ecosystem, ANMI says the SLB market remains underdeveloped due to high margin costs and low retail awareness. It calls for rationalizing margin requirements and improving retail access to SLB platforms. ANMI believes a well-functioning SLB ecosystem will empower investors to hedge or express views without relying solely on derivatives. It will also help curb excessive speculative activity and encourage a healthier market structure.

Reviving currency derivatives with unified regulatory support is another issue ANMI has focused on. Once highly active, the currency derivatives segment has seen a decline in volumes in recent years due to regulatory fragmentation between SEBI and the RBI. ANMI urges both regulators to collaborate and bring clarity to participation norms, including the restoration of access for unhedged positions. The association says reviving this segment is vital for exporters, importers, and institutions to effectively hedge currency risk in a globally integrated economy.

Allowing co-location in commodity markets is another key area ANMI is pushing for. Currently, co-location is allowed in equities but prohibited in commodities. ANMI says this regulatory disparity limits competitiveness and foreign investor access. Enabling co-location in commodities would modernize India’s commodity trading infrastructure and create a level playing field for all market participants.

ANMI has also demanded the introduction of fixed income index derivatives. It believes such instruments—linked to government and corporate bond benchmarks—will be useful for mutual funds, pension funds, and institutional investors to hedge interest rate and credit risk efficiently.

“These reforms are critical to building a more inclusive, liquid, and globally competitive market. We remain committed to working with regulators and stakeholders to align the evolution of our capital markets with the vision of a Viksit Bharat by 2047,” ANMI President said.

ANMI has consulted with trading members, intermediaries, and other market stakeholders and will formally approach SEBI with detailed data and studies.