What should entry or eligibility requirements be for derivatives trading?
The thrust of economic policy in India today is to encourage the competitive forces of the marketplace to differentiate winners from losers. A firm that unwittingly goes into derivatives trading without understanding the business is no different (say) from a firm which unwittingly goes into any other high technology area (like computer software or banking or floriculture). If the firm is unable to cope with the complexities of this area, it would go bankrupt. Thanks to the system of margins and counterparty guarantee, such bankruptcies would have no impact upon the rest of the market. The danger with eligibility criteria is that they effectively become entry barriers. All too often, entry barriers are used by incumbents to reduce the degree of competition in an area. The basic focus of economic policy should always be to maximise the degree of competition in any industry. The brokerage industry is no exception.
Related Questions
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- What should entry or eligibility requirements be for derivatives trading?
