The Securities and Exchange Board of India (SEBI) has clarified that it has no plans to curb retail participation in derivative markets. In a statement, SEBI said that it is at an early stage of evaluating if the existing circular on onboarding clients for derivatives trading can be made applicable based on risk assessment of the clients.
The circular that SEBI is referring to was issued in 2009. It requires stockbrokers to have documentary evidence of financial capability for all clients who want to trade in derivatives. SEBI is considering simplifying the process of onboarding clients by adopting a risk-based approach. This would mean that stockbrokers would only need to collect documentary evidence of financial capability for clients who are considered to be high-risk.
SEBI's decision to consider a risk-based approach is a welcome move. It will make it easier for retail investors to participate in the derivative markets, while still ensuring that they are not taking on too much risk.
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