Both approaches are extreme in their own ways and both reveal important truths about how societies think about risk, capital and their broader social priorities.In the United States, speculation is not only tolerated, but institutionalized. Retail investors have easy access to leveraged ETFs, ultra-short-term options, margin loans and a wide range of complex instruments that magnify both profits and losses.
These products are liquid, highly visible and widely acceptable within the financial ecosystem. Their availability is not coincidental.
It reflects a regulatory mindset that believes disclosure and individual choice are more important than setting hard limits on behavior. Where excess exists, it is largely accepted as an unavoidable cost of progress.
India has chosen a very different path. In India, leverage is tightly controlled, settlement systems are designed to limit excessive customer churn, and product complexity is carefully filtered before it reaches retail investors. When speculative activity surges, regulators quickly intervene and slow things down. The underlying assumption is simple. The underlying belief is simple. In the Indian context, the systemic and social risks of uncontrolled speculation are considered to far outweigh the benefits it could bring.
History helps explain why these two systems evolved so differently. In the United States, the stock market crash of 1929 was not just an institutional failure, but a massive retail event.
Middle-class households participated heavily, often using borrowed money, and many suffered serious losses. Yet this experience did not lead to a lasting withdrawal from speculation.
Instead, it reinforced the idea that households are part of both booms and busts, a pattern that continues to this day.
India has never allowed speculation to enter household finances on that scale. Savings are not seen here purely as individual assets. They represent family security, intergenerational capital and an informal form of social security.
So a major financial loss is not just a lesson from the market. It could become a long-term social setback. Indian market design reflects this reality.
Structural factors further exacerbate these differences. In the United States, retirement security is closely linked to market performance, forcing households to enter financial markets and blurring the lines between investing and trading.
In India, stronger household-based support systems reduce those pressures and allow households to approach risks with greater caution.
However, neither model is without flaws. The American system delivers exceptional innovation, liquidity, and capital formation, but it also produces recurring bubbles and periodic damage to household balance sheets.
The Indian system offers resilience and stability, but often at the expense of speed, experimentation and market depth.
The answer does not lie in either extreme.
A more sustainable model is somewhere in between. It encourages long-term investment and innovation, while setting firm boundaries around leverage, product complexity and financial gamification at the household level.
Speculation cannot be eliminated, nor should it be. But it must be contained, properly contextualized and tailored to social reality.
America shows what happens when speculation becomes industrialized. India shows what happens when it is treated with great caution. The optimal financial system borrows American dynamism without importing its excesses, and India’s prudence without stagnating growth.
Ultimately, markets work best not when risk is glorified or suppressed, but when it is understood, sensibly priced, and contained.
(The Author Feroze Azeez, Joint CEO, Anand Rathi Wealth Limited)
(Disclaimer: Recommendations, suggestions, views and expert opinions are their own. These do not represent the views of the Economic Times)
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