• Can something be done against SEBI killing derivatives market?

For some time now, SEBI's intent has been to kill the derivatives segment in the capital markets of India. They have introduced certain rules which have spoiled the derivatives segment. We traders have come together and formed an association called ARTI(Association of Retail Traders of India) and discussed this issue in depth and we have decided that we want to appeal against these rules in court and for that we need a lawyer. Following are the rules that have been introduced by SEBI - 

1. They increased the lot size so that retail traders will be required to bring in more capital to trade which is impractical for a retail trader. 
2. Introducing physical settlement instead of cash settlement in derivatives. With physical settlement, you need to bring in the entire capital of the contract in order to expire the product which is hard and impractical. Again retailers don't have such capital. Moreover, brokers are not willing to let their clients carry their positions to expiry because even they don't want to undertake the arduous and risky procedure of physical settlement. 
3. They have mandated that exposure margin is to be deposited with the exchange instead of the broker. The result of this is higher occurrences of penalties being levied on traders in case of negative margin as exposure margin is not being reported as free cash anymore. Indirectly this means higher margin requirements as free cash has to be left out. 
4. This one is yet to be implemented but this one has caused an outrage among traders. They require that traders must have restrictions put on them based on their networth. This might mean higher margin requirements or a cap on trading volumes on retail traders. This is just discriminatory as different rules are being applied just becuase someone is poor.
5. Triple STT for options trade. They are levying too much tax on options. In a game where profit margins are thin, higher STT adds to the burden of charges. While STT by itself is irrational as it's to be paid even when you are making a loss, higher STT is unreasonable.

All these rules have crippled the market. There is no benefit whatsoever from these rules and regulations which is why they are irrational and ultimately business is hurt. Retail traders are crucial to the market as they provide volume and liquidity. Without them, it means less business for brokers, exchange and even the government in the form of taxes. SEBI's reasoning behind curbing participation in the derivatives market is that too many people are trading derivatives compared to equity but this is just distorted as there's no harm in that. Derivatives are crucial as a product and there's no harm if people want to participate in that. Rather it makes the market healthy and efficient. That's why we want to petition against SEBI and prevent them from killing the market. Any legal advice would be helpful.
Asked 4 years ago in Constitutional Law

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7 Answers


In the facts as told by you, you may definitely file a writ of certiorari thereupon requesting the court to quashing the recent rules for it being arbitrary.

Get in touch with a lawyer who may file the writ on behalf of the association.


Anilesh Tewari
Advocate, New Delhi
17942 Answers
377 Consultations

5.0 on 5.0

File writ petition in HC against SEBI regulation on derivatives trading

2) before you file writ make representation to SEBI

3) if representation is rejected then only file writ

Ajay Sethi
Advocate, Mumbai
88383 Answers
6227 Consultations

5.0 on 5.0


the govt policy can be challenged on the grounds of being discriminatory and beneficial to only a particular class of traders. moreover, such differentiation has crippled the market and there is no visible and long-term benefit from it. thus on these narrow grounds only it can be challenged and it has to be shown that an alternative decision could have been taken in the interests of the general public and the traders.


Rahul Mishra
Advocate, Lucknow
13792 Answers
65 Consultations

5.0 on 5.0

Dear Sir,

There are a lot of aspects on which the aforesaid ruling can be challenged under writ jurisdiction. On facts, though it requires a lot of analysis, there are few things that look prima facie illegal. For example, the ruling seems to create a category without any nexus to attend. Similarly, it also seems that there is the excess delegation of power on SEBI which has led to unauthorized legislation.

All these aspects with other will require detailed discussion with you.

V Ranjan
Advocate, Delhi
62 Answers

5.0 on 5.0

Sir a writ petition can be filed to changeling the rules made by the SEBI since your question is exhaustive and it point requires research on Individual level but looking at the facts available on record a writ to high court can be made on ground that this is contrary to the article 19 for free trade and unreasonable restrictions are imposed vide these rules and same are arbitrary and contrary to the constitution of India.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

You need to file PIL if you have cogent evidence for the same before HC as it is affected the interest of public at large

Prashant Nayak
Advocate, Mumbai
27587 Answers
88 Consultations

4.4 on 5.0

Even though you are personally affected by such new rules, the rules imposed by SEBI re common in nature and applicable to the entire citizens of the country.

However, if you feel aggrieved by such decision or the rulings, you may gathre like minded people, make them parties to a PIL that can be filed in the high court or the even before supreme court venting out your grievances as traders and as commoners due to the stringent and impracticable rules introduced recently.

A PIL before high court may be a better option to express your agitation and record your resent ion this regard.

Let the SEBI appear before court and justify their stand behind the recent rules framed and the court to decide the issue on merits.

T Kalaiselvan
Advocate, Vellore
78541 Answers
1554 Consultations

5.0 on 5.0

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