Mumbai: Markets regulator Sebi Chief Tuhin Kanta Pandey has ruled out the possibility of an aptitude test for retail traders wanting to participate in the Futures & Options (F&O) segment, saying it is impractical and prone to regulatory overreach.

The Securities and Exchange Board of India (Sebi) had earlier introduced measures in November last year in a bid to curb excess speculation in derivatives. These regulatory steps came in the wake of a Sebi study that revealed a staggering 9 out of 10 retail investors lose money, while trading in F&O instruments.

When asked about the industry’s suggestion of introducing tests for retail investors before permitting them to trade in risky derivatives products, Pandey clarified the regulator’s stance. “Right now, we aren’t really considering any of those things.”

He explained the concerns of practicality and effectiveness behind such proposals. “Number one, we have to also see, will it be a regulatory overreach? Will you be able to effectively do it?,” he told in an exclusive interview.

Sebi, he clarified, already has certification mechanisms for specific market participants. “I mean, we do have for specific players, those who are registered with the system, we do have this. Like for example, NISM certification is there for several. Like you are a registered advisor or an IA or RA.”

But applying this to millions of retail traders would be a different challenge altogether.