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NSE MD and CEO Ashish Chauhan proposed implementing minimum qualification criteria (such as capital or net worth thresholds) for F&O trading, drawing inspiration from markets like the US and Singapore to protect retail investors.
Speaking to ANI, he said that the government cannot prevent small investors from trading in futures and options (F&O) by taxing derivatives more heavily; instead, eligibility should be linked to the investor's tax-paying capacity, cautioning policymakers. His remarks follow the recent hike in Securities Transaction Tax (STT) in the Union Budget, where the government increased the levy on F&O trades amid concerns over rising retail participation and speculative activity in the derivatives segment. On the efficacy of higher taxation as a deterrent, Chauhan was categorical. "Why would you say that by taxing more, I will stop them from doing it? It's the other way around...By increasing the tax, they are still going to trade. It's like a lottery. You put tax, people are still buying lotteries, right?" Instead, he proposed a qualification filter based on taxes paid. "If you don't have so much tax paid, like 10 lakh a year or 20 lakh a year, we will not allow you in. Automatically, small investors will go away because people who pay 20 lakh rupee tax are not small," he said. "But by taxing more, you are not stopping that small investor from coming." At the same time, Chauhan reiterated that derivatives are inherently risky for retail participants. "Derivatives are very risky. You lose your money most of the time. Questioning the narrative that India dominates global options markets, Chauhan said comparisons often ignore contract value. "You are talking about the amount traded. So last month, India was doing 20% of America's option premium traded in stocks. Only 20%... Because our per-transaction value is USD 100. Their (America's) per transaction value is probably USD 1 million. But it's also the power of a small investor in our country," he added, arguing that per-trade ticket sizes distort global comparisons. Warning against policy overreach, Chauhan cited the example of South Korea. "In 2012, Korea was one of the leading options markets in the world. "The government felt we could not be doing this. That market was taxed heavily. It came down by 90%. In 2025, the South Korean government called me to advise them on how to bring back the market," he said. "So sometimes what you have, you hate. And when it goes away, you want it back." As the debate over STT and retail participation intensifies, Chauhan's central argument remains that calibrated eligibility norms, not blunt tax hikes, may be a more effective way to balance market development with investor protection. (ANI)
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