India's derivatives market has been booming—so much so that it’s become the largest in the world in terms of volume. But this rapid growth has raised concerns for market regulators. The Securities and Exchange Board of India (SEBI) believes that many retail investors are diving into the Futures & Options (F&O) segment without fully understanding the risks. That’s why SEBI is stepping in with a fresh set of rules aimed at enhancing transparency and investor safety.

Let’s break it down in a simple and digestible way.

What's Changing?

SEBI's new framework revolves around disclosures, risk warnings, and suitability checks. The key points include:

1. Mandatory Risk Disclosures

• All brokers must now show risk disclosure statements before allowing any investor to trade in F&O.

• These include data like the percentage of clients making profits vs. those making losses.

2. Profit/Loss Reports on Broker Platforms

• Brokers will now display historical data on the F&O segment, such as:

  • % of traders who made profits

  • % of traders who lost money

  • Median profit and loss values

This is intended to give a reality check to new traders about how difficult it actually is to profit from F&O trades.

3. Eligibility Criteria for F&O Traders

• SEBI is proposing that only those meeting certain thresholds should be allowed to trade:

  • Annual income of at least Rs 5 lakh, or

  • Net worth of at least Rs 25 lakh, or

  • Minimum F&O turnover of Rs 10 lakh in the previous year

This rule hasn't been finalized yet, but it suggests that SEBI wants to protect less experienced or under-capitalized traders from risky instruments.

Why SEBI Is Concerned

Over the past few years, data shows that most retail investors lose money in F&O trading. Despite this, brokers have aggressively marketed these segments through social media influencers, promising quick profits. SEBI’s new rules aim to curb this hype and promote responsible investing.

What This Means for You

• If you're a seasoned trader: You’ll see more disclosures, but can continue trading as usual.

• If you're a beginner: Be prepared for stricter onboarding and income verification.

• If you're an influencer or broker: Expect closer scrutiny and tighter guidelines on promotions and educational content.

The Bigger Picture

These rules aren’t meant to scare away investors. Instead, SEBI is trying to build a more informed and sustainable F&O market. Just as mutual funds carry disclaimers, the F&O segment will now come with its own warning signs—and that’s not a bad thing.

Final Thoughts

SEBI’s new F&O rules reflect a shift towards transparency and accountability in India’s booming derivatives space. By setting new standards, SEBI is not shutting doors—it’s just ensuring that the right doors open for the right people.

Written by Indira Securities SEBI Registered with 30 plus years of experience in Stock Market!!!