Derivative exposure based on Income tax returns for retail traders - Outcome from latest SEBI board meeting

There has been talks of SEBI coming up with regulation to reduce derivative exposure for retail traders. Find below from SEBI board meeting held today.

Unlike what was expected, lot sizes aren’t being changed.

To reflect global initiatives on product suitability, a framework has been approved. Individual investors may freely take exposure in the market(cash and derivatives)upto a computed exposure based on their disclosed income as per their Income Tax Return(ITR) over a period of time. For exposure beyond the computed exposure, the intermediary would be required to undertake rigorous due diligence and take appropriate documentation from the investor.

It will be interesting to see how this exposure based on disclosed income will be calculated. Also what kind of diligence will brokers be asked to allow clients exposure beyond this calculation. Looks like something which will definitely reduce the number of retail participants on the derivatives market.

Also i don’t know how operationally all of this will work. A client can give the same ITR proof with multiple brokers and take a lot more exposure. So the exposure limits will have to be set at exchange levels. hmm… will be interesting to see how this evolves.


So less liquidity in the market great just what we need. Thanks SEBI.

Do you reckon this rule will apply only for Carry Forward FnO Positions or for Intraday positions as well ?

Because of this reason , i view SEBI in negative picture . Volume & retail participation will reduce in the stock market

1 Like

hey nithin first of all thanks for new kite
i liked it very much

pls help retailers speak uss on retailers behalf to sebi

thats all we expect from zerodha

:joy::joy::joy:Big daddy SEBI trying to save Indians… great father… have already discussed this in the past in this platform

1 Like

“Stock exchanges have also been allowed to introduce co-location services on a shared basis. Tick-by-tick data will be provided free of charges, while existing norms for F&O trading will be enhanced, Sebi said.”

Cant believe it !!! SEBI really did this ???
How would this affect brokers earnings ?
When do you think this will be implemented ?
Are brokers for this or against this ?
Watch the media briefing here. At about 16:00 he talks about derivatives.

I heard from some guys in US that their brokers ask a few questions and that is their “product suitability test” after which they can trade provided they have $2k in their accounts.

So now Futures & Options and therefore hedging will become the fiefdom of the rich!


@nithin In the media briefing the SEBI chairman said that it will be a soft touch regulation. Hope that the exposure calulation will not be stringent.
When will these regulation come into effect?

Implementing this in practice will be a huge task. I don’t think this will come into action for a long time. Unless they start using some broken system and keep repairing it as and when they find some loopholes. In the name of protection, they are trying to keep small traders out. but then, there are stupid people who have got busted, while doing some insane trading. In this forum itself I have seen people mentioning “I lost 16 lakh in a year, what do I do now?” but then the question is out of all retail traders, how many fall in this insane category. I guess very few. and the government is trying to protect them who are already doomed wherever they go.


@nithin is there a possibility that the new rules take into account net worth in lieu of or alongside an individual’s income?

Bullshit action from SEBI, then how can anyone an hedge is long term holding during market crash…if options and future restrication for small trades .it will create liquidity issues…around 50 to 60% active traders trade in option & future…


This is a game of big players

  1. Earlier NSE’s illegal activities ( co-location case - ) are made legal by sharing co-location services
  2. Algo traders benefit the most , again big players
  3. In FNO, on expiry settlement to be in physical going forward , so unprecedented volatility during near expiry time just like weekly Bank nifty expiry, i think FPI’s doesn’t like physical settlement .
1 Like

They are imposing physical delivery on us. In US only 2% of FUT contracts go into physical settlement.And they witness low liquidity towards expiry.Another dud !


I’ve never filed IT returns since my income is below taxable limits. How will exposure be calculated for people like me (i’m sure there r many). Worried, cause they are talking about both “cash and derivatives”. Does this mean no trading even in equity cash segment if we don’t have “Income Tax Return(ITR) over a period of time”. @nithin

What about full time small traders? Though we make small amount in the market, we provide liquidity + act as counter-party risk takers for those who hedge. This is very negative for us. Lot more clarity required wrt this announcement.

This will increase the Compliance level of trading members as well as traders where more emphasis will be on Net worth of individual as well as their income. Its purely individual wisdom , curious to understand how SEBI can control when one can have multiple trading account … when all trades are linked to PAN

This is another Bull Shit by SEBi in favor of Big Players. They always take decisions in favor of big players. Government should interfer & stop SEBI to do this. Are they want to make Jobless to a lot of full time Retail traders?
Very shameful act & Gov. is mum on this.

1 Like

The SEBI step is not good rather SEBI should reduce lot size

1 Like