BT India@100: Small investors should not trade in derivatives, says NSE chief Ashishkumar Chauhan

India is among the rare developing countries where a robust, technology-driven capital market ecosystem has been created with the small investor at its core, said Ashishkumar Chauhan, MD and CEO, NSE, during a session at BT India @100 on Friday. Reflecting on India’s market journey and the challenges ahead, Chauhan emphasized the importance of regulation, investor protection, and digital infrastructure in shaping a market that mobilizes national savings.

“In India, a woman in Jorhat or Durgapur can invest Rs 1,000 in a company in Salem without ever seeing the business. That is the kind of leap of faith we have enabled. And this is possible only because we have built trust through governance, technology, and transparency,” the market watcher said.

Sharing his views on the recent concerns around the misuse of derivatives, Chauhan referred to the Jane Street episode, which raised questions about large institutions profiting at the expense of retail investors. He clarified that while such incidents spark debate, they must not obscure the fundamental truth—that derivatives are not meant for small investors in the first place.

“Small investors should not trade in derivatives. These are complex, highly leveraged instruments intended for individuals who fully understand the risks involved. I have been saying this for years. If someone still chooses to trade in these markets, they must be fully aware of the pitfalls,” he said.

He also added that exchanges and regulators must work together to put in place mechanisms that detect and prevent harmful trading patterns.

On NSE’s journey, Chauhan acknowledged that he returned to the exchange at a difficult time when its reputation had been damaged and its technology infrastructure required urgent upgrades.

With India aiming to become a $30 trillion economy by 2047, Chauhan sees vast potential for markets to expand and deepen.

Regarding the much-anticipated NSE initial public offering (IPO), he clarified the regulatory hurdles and the current status. “NSE cannot list on itself—that is a regulatory restriction. If we list, it must be on BSE or another exchange. We first require a no-objection certificate (NOC) from Sebi. Once we receive that, we shall prepare our DRHP and submit it again to Sebi, and only then can we proceed for listing. The NOC has not yet been issued.”

Chauhan also called for rationalization of the Securities Transaction Tax (STT), especially on options trading, where the tax is applied on notional value rather than actual profit. “STT has served its purpose, but now we have capital gains tax. If we rationalize STT—particularly in options—it will improve participation without compromising revenue,” he said.