Market Experts Propose F&O Trading Tests to Safeguard Investors

In a move to protect retail investors, industry experts have suggested the introduction of tests for those wishing to trade in high-risk derivative products. This proposal, drawing inspiration from practices in Singapore, Hong Kong, and the EU, was submitted to SEBI following the regulator's recent consultation paper on equity F&O segment reforms.

Concerns Over Market Concentration and Innovation

Feedback on the consultation paper highlighted fears that stricter regulations might lead to a concentration of trading on a few exchanges, potentially hindering product innovation. Additionally, limiting F&O expiry days could increase volatility and necessitate costly risk management solutions, possibly stifling competition among emerging exchanges.

Impact on Product Diversity and Market Risk

Proposals to restrict weekly benchmark index options contracts to one per exchange could limit the diversity of products available to investors, affecting various strategies and segments. Such restrictions might inadvertently increase market risk by narrowing the focus of traders to fewer instruments.