Apparently SEBI has officially rejected the proposal to implement mandatory aptitude or suitability exams for retail investors trading in Futures and Options (F&O) in May 2025.
I wish they reconsider this decision. SEBI reminds us of the losses faced in F&O by retail traders every time a trading app is opened. But constantly increasing STT every year during the Union Budget is not the right solution, IMHO.
SEBI can charge fees for the exam - like Rs 1,000 to 2,000. Nobody says it needs to be free.
The exams can be administered by an entity that is already experienced with large scale public exams for PSU jobs - like TCS iON, for eg. The exam can also be conducted entirely online like some exams conducted by schools/ colleges during Covid. It can be conducted twice a year.
Market knowledge is available for absolutely free, for eg. Zerodha Varsity course is a shining example.
Only traders who score above 75 in the test [meaning they truly understand F&O strategies and risks]
can be allowed to trade in derivatives.
I don’t think it would work, or at least it could defeat SEBI’s purpose. Non qualified people may simply trade through qualified individuals, and it could actually create a business opportunity for those who pass the exam. Moreover, any default or misconduct by the qualified person could lead to even greater losses.
Then how do we curb the losses of retail investors?
Showing warnings doesn’t seem to work out - Statistical Reality : According to SEBI data, the average loss per retail trader is approximately ₹1.1 lakh annually [up from ~Rs 50,000 in FY23] , with cumulative losses across FY22–FY25 nearing ₹3 lakh crore .
Real money gaming was banned last year and I don’t think even RMG caused this level of cumulative wealth erosion from retail investors. But banning F&O is not an option either.
Great Idea
But i think SEBI employess and board members should take the exam first because CAS is a complete disaster until now and is designed to help the biggies . So how can these great minds come up with something thats not backtested ?
Regarding retail only top 1% of who crack the exam should be allowed to do FNO , Must have 6" height , weight under 70 kgs , no diabetes and with a sound heart condition and most important with a Net worth of 50 crores.
This should be done from next month .
An exam is definitely a good idea, but I had a slightly different thought.
F&O isn’t just about knowledge, it’s also about mindset and financial discipline. So instead of only checking income or holdings, what about considering credit score as one of the eligibility factors?
Someone with a good credit history may be less likely to take reckless financial decisions.
Just a thought… happy to hear if I’m missing something or any other suggestion
Buddy, its just a suggestion here, but when you called it a “nonsense idea,” I was just thinking why not we look at how many retail clients are actually trading compared to India’s total population?
The percentage might still be small today, but with more people getting access to markets, easy credit and all these finfluencers pushing options, that number could grow quite a bit.
I might be wrong, just putting out a different perspective… Personally, I feel the retailers trading derivatives today might only know the tip of the iceberg…
SEBI has already banned fin-influencers to give advice without REGISTRATION and Yes number will and should grow, Indian market is so small there are few US companies which are larger than whole indian stock market.
I also don’t like influencers giving medical advise on internet without degree but that is not gonna change. Both are different problems and if option traders take test, do you this influencer will stop giving advice ?
FNO is consider as business as per ITD and there should be no barriers to start this.
People start trading and if they won’t learn to make money they will eventually stop.
Academia(intellectual circus) has no place in any risk-taking endeavor… You can become a good babbler through it, but that doesn’t make you a real risk-taker.
NISM VIII exists which is a certification of equity derivatives. There are certifications of Currency derivatives and Interest rate derivatives as well. But it is the same thing as any other field. Book knowledge does not equate to real world results, especially in trading derivates. Top learners can score high marks in the exams and enter the markets and still end up in losses.
