UPSC Prelims Practice Questions — India’s F&O boom needs adequate protections

Q1. According to SEBI's July 2025 study on individual equity F&O traders, in which single financial year did the aggregate net losses of individual traders reach their highest level?

  • A. FY22
  • B. FY23
  • C. FY24
  • D. FY25

Q2. SEBI's updated finding that cumulative net losses of individual equity F&O traders crossed ₹2.8 lakh crore pertains to which period?

  • A. FY19 to FY22
  • B. FY22 to FY24
  • C. FY22 to FY25
  • D. FY23 to FY25

Q3. With reference to the demographic profile of loss-making individual F&O traders as reported by SEBI, consider the following: 1. Nearly three-fourths of them were from cities beyond India's top 30 cities (tier-2 and tier-3 cities). 2. A majority reported annual income below ₹5 lakh. 3. The loss-making population was predominantly female. 4. A rising share of them were below 30 years of age. Which of the above is/are correctly identified?

  1. Nearly three-fourths of them were from cities beyond India's top 30 cities (tier-2 and tier-3 cities).
  2. A majority reported annual income below ₹5 lakh.
  3. The loss-making population was predominantly female.
  4. A rising share of them were below 30 years of age.
  • A. 1 and 3 only
  • B. 2 and 4 only
  • C. 1, 2 and 4
  • D. 1, 2, 3 and 4

Q4. The studies profiling the demographic characteristics (age, income and city-tier) of loss-making individual traders in the equity F&O segment were conducted by which of the following bodies?

  • A. Reserve Bank of India (RBI)
  • B. Securities and Exchange Board of India (SEBI)
  • C. Insurance Regulatory and Development Authority of India (IRDAI)
  • D. Pension Fund Regulatory and Development Authority (PFRDA)

Q5. In India, the statutory definition of a 'derivative' (including contracts deriving value from an index or prices of underlying securities) is contained in which one of the following Acts?

  • A. Securities Contracts (Regulation) Act, 1956
  • B. Securities and Exchange Board of India Act, 1992
  • C. Depositories Act, 1996
  • D. Companies Act, 2013

Q6. With reference to the distinction between futures and options contracts, consider the following statements: 1. In a futures contract both parties are obligated to honour the contract on expiry, whereas an options buyer holds a right but not an obligation. 2. An options buyer pays a premium to the seller, whereas a plain futures contract does not involve payment of a premium. 3. Unlike futures, options can only be settled by physical delivery of the underlying and never by cash. Which of the statements given above is/are correct?

  1. In a futures contract both parties are obligated to honour the contract on expiry, whereas an options buyer holds a right but not an obligation.
  2. An options buyer pays a premium to the seller, whereas a plain futures contract does not involve payment of a premium.
  3. Unlike futures, options can only be settled by physical delivery of the underlying and never by cash.
  • A. 1 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q7. In SEBI's October 2024 framework to strengthen equity index derivatives, the 'rationalisation of weekly expiry' measure precisely means which one of the following?

  • A. Each stock exchange may offer weekly-expiry contracts on only one benchmark index
  • B. Weekly-expiry index derivatives are prohibited entirely across all exchanges
  • C. Weekly-expiry contracts are permitted on only one exchange nationally
  • D. Weekly-expiry contracts are allowed only on the Nifty 50 across all exchanges

Q8. Which of the following was SEBI's first major study analysing the profit and loss of individual traders in the equity F&O segment?

  • A. The January 2023 study 'Analysis of Profit and Loss of Individual Traders dealing in Equity F&O Segment'
  • B. The September 2024 updated study on FY22–FY24 losses
  • C. The July 2025 study on FY22–FY25 losses
  • D. The May 2023 risk-disclosure circular

Q9. SEBI is often described as exercising 'quasi-legislative' powers. In this context, the quasi-legislative function of SEBI refers precisely to which one of the following?

  • A. Its power to frame regulations and rules for the securities market
  • B. Its power to adjudicate disputes and impose penalties on market participants
  • C. Its power to investigate and conduct search-and-seizure operations
  • D. Its role in advising the Union government on fiscal policy

Q10. Which one of the following Acts conferred statutory status on SEBI as the principal regulator of India's securities market?

  • A. Securities and Exchange Board of India Act, 1992
  • B. Securities Contracts (Regulation) Act, 1956
  • C. Depositories Act, 1996
  • D. Companies Act, 2013

Q11. With reference to the growth of India's equity derivatives market, consider the following statements: 1. NSE became the world's largest derivatives exchange by number of contracts traded in 2019. 2. Weekly-expiry contracts and index options have been key drivers of India's rising derivatives volumes. 3. India accounts for only a marginal single-digit share of global index options trading. Which of the statements given above is/are correct?

  1. NSE became the world's largest derivatives exchange by number of contracts traded in 2019.
  2. Weekly-expiry contracts and index options have been key drivers of India's rising derivatives volumes.
  3. India accounts for only a marginal single-digit share of global index options trading.
  • A. 1 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q12. In the context of SEBI's investor-protection architecture, the Investor Protection and Education Fund (IPEF) is meant primarily for which one of the following purposes?

  • A. Protection of investors and promotion of investor education and awareness
  • B. Compensating investors for losses arising from a stockbroker's default
  • C. Guaranteeing a minimum rate of return on equity investments
  • D. Insuring individual traders against market losses in F&O trading