National Stock Exchange Chief Flags Need for Derivatives Eligibility Norms

Ashish Chauhan, Managing Director and CEO of the National Stock Exchange (NSE), has called for introducing minimum qualifying criteria for participation in India’s derivatives market, amid rising concerns over excessive retail speculation.

Speaking at the Futures Industry Association conference in Mumbai, Chauhan said derivatives will play an even more pivotal role over the next 20–50 years, driven by rapid technological disruption, geopolitical uncertainty and evolving global financial systems. However, he cautioned that a developing economy like India cannot afford unchecked participation by financially vulnerable sections in high-risk futures and options (F&O) trades.

Concern Over Disproportionate Retail Participation

Chauhan noted that regulators and exchanges are likely to continue tightening norms as long as there is a perception that lower-income or less financially aware investors are disproportionately engaging in speculative F&O trading and incurring significant losses.

He stressed that market integrity and investor protection must go hand in hand with financial market development.

Global Models Offer Blueprint

Drawing comparisons with global regulatory practices, Chauhan suggested India could adopt a minimum eligibility framework similar to models in Singapore and the United States.

In these markets, derivatives participation often requires suitability assessments, financial thresholds, or demonstrated knowledge of complex instruments. According to him, most advanced jurisdictions have already moved toward such structured frameworks, and India should consider doing the same to ensure adequate safeguards for economically weaker participants while aligning with broader policy objectives.

Regulatory Tightening Already Underway

In recent months, the Securities and Exchange Board of India (SEBI) has implemented several measures aimed at curbing speculative excesses in the F&O segment. These include revisions to contract specifications and stricter risk management norms.

Additionally, in the Union Budget, the government increased the Securities Transaction Tax (STT) on F&O trades. The Reserve Bank of India (RBI) has also tightened funding norms for proprietary trades. Both measures, effective April 1, are expected to have a significant impact on derivatives market activity.

Chauhan’s remarks add fresh momentum to the debate over balancing market growth with investor protection, particularly as India’s derivatives segment continues to expand rapidly.

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