The Securities and Exchange Board of India has rejected proposals for a mandatory aptitude test for retail traders, citing practicality concerns, as the debate over investor safeguards intensifies following findings of significant losses among small investors.
SEBI has drawn a line under calls for a mandatory aptitude test before retail investors can trade futures and options, saying such a requirement would be impractical and amount to regulatory overreach. The regulator’s stance follows a study showing that about 90% of individual traders lose money in the derivatives market, a figure that has renewed debate over whether stronger safeguards are needed for small investors taking on leveraged bets.
Tuhin Kanta Pandey, SEBI’s chairperson, has argued that the risks of futures and options are already clear and that investors should retain the freedom to decide whether to participate. Reporting by The Economic Times and Business Standard said Pandey rejected the idea of a test for retail traders in early May 2025, while Fortune India noted that the regulator had already tightened rules for the segment months earlier after the losses study was published. A SEBI whole-time member, Ananth Narayan, also said at a board meeting in March 2025 that no exam or suitability test was under consideration, according to 5paisa.
The rejection does not end the broader policy debate. Critics of the current approach argue that repeated warnings are not enough and that some form of mandatory qualification could help reduce avoidable losses among inexperienced traders. Supporters of SEBI’s position counter that access to markets should not be blocked by a gatekeeping test and that investors must bear responsibility for their own decisions. The regulator’s challenge is to balance financial freedom with the reality that derivatives trading can be highly risky, especially for small investors who may not fully understand the odds.
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