Indian regulator seeks to balance fairness with innovation - FOW Conference
24th September, 2025|Luke Jeffs
The Indian financial regulator has signalled its determination to balance fairness with innovation as the watchdog reacts to “a paradigm shift” in the markets it regulates.
Speaking at the FOW Trading India conference in Mumbai on Wednesday, the chief general manager of the Securities and Exchange Board of India said the markets regulated by SEBI have changed beyond recognition in the past five years.
Richa Goel Agarwal told the delegation: “We are witnessing a paradigm shift reshaping India’s market structure.”
The SEBI manager went on to list four trends that define this change: the massive growth in Indian cash-settled options; the high participation of retail investors; a more collaborative approach by the regulator itself; and the increased participation of tech-savvy firms such as high-frequency and algo traders.
On this last point, Agarwal said: “As a regulator, we have emphasised the guardrails that need to be there: volatility controls, pre-trade validation, kill switches, order-to-trade ratios, cyber resilience. Some of these things make our markets safer but we know that we all have to co-exist.
“We do not want to stifle innovation… but we have to ensure transparency and fairness. That is what, as a regulator, we are trying to do.”
The comments also came less than a year after the regulator introduced in November 2024 measures to reduce retail investor participation in the Indian equity index options market which has grown exponentially in recent years.
Agarwal said on Wednesday: “It is no longer only sufficient to merely dwell on the size [of the market], rather the growth must be sustainable, transparent and resilient. That’s the moto that we have been working on.”
The SEBI intervention has been effective with the Indian equity index option market reducing by 75% in volume terms from 16 billion lots in October last year to 4 billion lots in August, according to FOW Data.
The measures to reduce retail speculation through equity index options are part of a longer-term play to shift the focus in the Indian equity derivatives market.
“SEBI stance is to encourage longer-dated derivatives so that the derivatives eco-system supports capital formation rather than speculation.”
Agarwal added: “We have often stated that equity derivatives play a crucial role in capital formation but we must ensure quality and balance. We will consult with stakeholders on ways to improve in a calibrated manner the long-term maturity profile of derivatives we provide so they better serve as hedging and investment tools for longer term investment.”
