Brokers association to recommend SEBI to increase entry barriers to F&O

The Brokers Association ANMI (Association of National Exchanges Members of India) is working on drawing up recommendations to make cash equity markets for retail participants amidst the Jane Street manipulation in the futures and options trade.

Part of their recommendations was to increase the entry barriers for retail participants to start trading in F&O. The president of the association K. Suresh said that akin to markets like South Korea, a minimum of one year before getting into the derivatives or an exam conducted by bodies like National Institute of Securities Market (NISM) or even monetary barriers to enter products like futures and options. To be sure, NISM certification is mandatory for research advisors, stockbrokers, among other,s providing services in the securities market.

ANMI also mentioned other suggestions such as introducing co-location facilities for commodities, and increasing the host of stocks in the security lending and borrowing, to allow more short selling.

Encouraging and liberalising rules for innovative products in cash and fixed income can prompt retail participants to move to the cash market, which can effectively reduce participation in the derivatives market, Mr. Suresh said. ANMI is set to submit this to SEBI in one or two months after study and research on the subject, Mr. Suresh added.

According to SEBI, nine out of ten players lose money in the derivative market, which is now dominated by large traders and companies which use algorithms that can process information and execute trades in seconds, a facility that is often not available to the average retail participant.