SEBI is not considering holding exams for investors to test suitability for F&O trading: Ananth Narayan

The October 2024 directives were aimed specifically to address concerns about overtrading on index derivatives on expiry day, said SEBI's WTM Ananth Narayan

The market regulator is not considering conducting exams for investors to determine their eligibility for trading in futures and options (F&O), said the Securities and Exchange Board of India's Whole-time Member (WTM) Ananth Narayan.

Narayan was answering a question on the subject at a press conference following a SEBI board meeting on March 24.

He said, "Are we specifically looking at anything (as entry barriers like the National Institute of Securities Markets (NISM) exams for investors) at this point in time? No."

This confirmed a report by Moneycontrol that was published following reports that such an exam was being considered. Moneycontrol had reported that this was not the case and that SEBI was not deliberating on holding such a test for investors.

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During the media interaction, SEBI Chairman Tuhin Kanta Pandey said the regulator was looking at investor protection through increasing investor awareness and also by carrying out systemic improvement so that any "manipulative risk against small investors is reduced".

It was after this that Narayan was asked to add his inputs about the supposed NISM exam for investors.

He said, "Many years ago, in 2012, exchanges had told brokers that people who are trading on their platforms should be aware (of market behaviour and risk). Exchanges are first-line regulators and so there is already a requirement between them and brokers to ensure that people who are coming in are aware (of the risks)."

Narayan added that the regulator is not considering anything specifically at this point to limit investors' participation in the F&O segment.

He said that directives issued on October 1, 2024, were to specifically address the regulator's concerns about overtrading on index options on expiry day.

The October 1 circular that hinged upon governing index derivatives trading in the interest of investor protection and market stability among other things reduced the number of index derivative contracts with weekly expiries, introduced an additional margin requirement and increased the minimum contract size.