The Securities and Exchange Board of India (SEBI) will release a fresh, more granular study on retail participation and losses in futures and options trading within the next eight days to 10 days, Chairperson Tuhin Kanta Pandey announced on Wednesday at the Global Commodity Conclave 2026. According to NDTV Profit, the study will look beyond aggregate retail losses to examine who is trading, who is losing money and how different categories of participants are performing, with the analysis not limited to retail investors but extending to even sophisticated market participants. "Even big players are losing money in options trading," Pandey emphasized, stressing that options trading, particularly on expiry days, is not as easy as it may appear. The new study comes as SEBI continues to monitor participation and losses in derivatives markets and assess the impact of its regulatory interventions, with the regulator engaging with market participants and welcoming suggestions as regulatory changes take effect.
Regulatory measures introduced by Securities And Exchange Board of India (SEBI) have significantly curtailed retail investor losses in the equity derivatives segment. According to reports from CNBC TV18, The Economic Times, PTI, The Times of India, and Business Standard, the aggregate net losses of retail investors in the equity derivatives segment decreased to ₹91,685 crore in FY26, down from ₹1.12 lakh crore in the preceding fiscal year. Minister of State for Finance Pankaj Chaudhary informed Parliament that these measures led to a decline in the number of unique individual investors from 98.10 lakh to 78.60 lakh and reduced individual losses from ₹1.11,788 crore to ₹91,685 crore in 2025-26. However, as per The Times of India, the average per person loss increased marginally to ₹1.2 lakh in FY26 from ₹1.1 lakh in the previous year, indicating that losses were more concentrated among fewer investors despite the overall reduction in total losses. The government data, based on information collected from the top 15 brokers representing about 90% of all individual investors, showed that retail participation almost doubled between FY21-22 and FY24-25 before falling sharply in FY25-26, with aggregate losses more than doubling from ₹40,824 crore in FY21-22 to ₹91,685 crore in FY25-26. Despite the regulatory success in reducing overall losses, Business Standard reports that a fifth straight year of losses underscores the limits of those efforts and the challenge of dissuading individual investors from trading derivatives.
The regulatory interventions have significantly impacted trading activity in the equity derivatives segment. As reported by CNBC TV18, The Economic Times, PTI, The Times of India, and Business Standard, equity derivatives turnover dropped to ₹202 lakh crore in FY26 from ₹213 lakh crore in FY25. The latest data from The Economic Times shows that the average daily notional turnover for futures and options listed on the National Stock Exchange of India Ltd. declined 23% to ₹214 trillion rupees ($2.2 trillion) in July from June, reaching a 17-month low. Additionally, both retail investor volumes and overall trading turnover in equity derivatives fell in FY26 compared to the preceding year, as confirmed by Minister Chaudhary in his written reply to the Rajya Sabha. Despite the overall decline in trading volumes, the average per person loss increased to ₹1.2 lakh from ₹1.1 lakh over the period, indicating that losses were more concentrated among fewer investors. The government clarified that the turnover figures refer to notional turnover in futures and premium turnover in options, with the number of retail F&O traders falling by around 20% from 98.1 lakh in FY24-25 to 78.6 lakh in FY25-26. SEBI's 2025-26 annual report shows combined notional turnover in equity derivatives on the National Stock Exchange and BSE increased 4.3% during the year to ₹1,10,418 trillion, reflecting how contract volumes and notional values can move differently after regulators increase minimum contract sizes.
The regulatory clampdown has reshaped market dynamics among different participant categories. According to Business Standard, individuals account for nearly 31% of trading in equity derivatives contracts, which offer a relatively cheap way to speculate on stock-price moves, up from 26% last year, indicating that retail traders' influence has actually grown despite the overall decline in participation. However, proprietary traders, including high-frequency trading firms, have seen their share of notional derivatives turnover at the NSE fall to 58.1% in June from more than 60% last year as trading futures and options has become more expensive. As per Tejas Shah, head of derivatives at Equirus Securities Pvt., "Lot of the curbs by the regulators have not led to the right impact as a whole. Regulator's intention is probably right to keep retail traders away from options, but at the same time, it is harming institutional investors." The stricter rules are also hurting stock exchanges, which were among the biggest winners of India's retail trading boom. SEBI Chairman Tuhin Kanta Pandey told local media that the regulator would take a data-driven, balanced approach to curb excessive speculation in equity derivatives, focusing only on short-tenor index options. Pandey described the recent change to the cash-market closing mechanism as a "major market microstructure reform," noting that India had lagged several global markets on this issue, with similar closing mechanisms already used in Japan, Hong Kong, the US, Germany, Europe and Australia.
SEBI has implemented comprehensive measures since November 2024 to strengthen the F&O segment. According to the minister's statement, these measures include rationalisation of weekly index derivatives products, increase in tail risk coverage on the day of options expiry, higher contract size for index derivatives, rationalisation of monthly index derivative products, upfront collection of option premium from buyers, removal of calendar spread treatment on the expiry day and intraday monitoring of position limits. In May 2025, SEBI took further measures aimed at streamlining the expiry days of various derivative contracts across multiple exchanges and implementing appropriate risk metrics for position limits for better monitoring and disclosure of risks in F&O. As per Business Standard, the central bank last month introduced tighter funding rules for proprietary traders and stock brokers, adding to the regulatory framework. Among the measures announced in October 2024 were larger minimum contract sizes, limits on the number of weekly index derivatives products offered by exchanges, upfront collection of option premiums and tighter monitoring of positions around contract expiry. Under a framework issued in May 2025, exchanges were required to standardize expiry days, while weekly derivatives were restricted to one benchmark index for each exchange. The measures have substantially reduced the number of derivatives contracts being traded, with SEBI's 2025-26 annual report showing the volume of options contracts traded across the market fell 51.5% to 6,460 crore during the year from 13,321 crore in 2024-25, while futures contract volumes fell 17.7%. The government also noted that SEBI has not examined the impact of algorithmic and high-frequency trading on market fairness and retail investors.
Industry experts are questioning the effectiveness of current regulatory measures in protecting retail investors. "Regulator and government needs to think why year after year we see these losses," said Abhay Agarwal, founder at Piper Serica Advisors Pvt., as reported by Business Standard. "At some point, more needs to be done to plug this hole and to protect retail investors." The trading-loss data are significant for India's $5.2 trillion stock market, with SEBI's focus on data-driven, balanced approach to curb excessive speculation in equity derivatives, focusing only on short-tenor index options. However, the data presents a mixed picture: SEBI's measures have coincided with a sharp reduction in retail participation and aggregate losses, but those continuing to trade F&O are still losing more than ₹1 lakh per person on average. The latest data shows that the average loss per person increased to ₹1.16 lakh in F&O in FY26 from ₹1.14 lakh in FY25, representing a five-year high and substantially higher than the ₹86,728 average loss recorded in FY24. The regulatory approach reflects the challenge of balancing market participation with investor protection, particularly as nine out of every 10 retail traders lost money trading derivatives despite repeated warnings about the risks of competing against better-funded, more experienced players. The latest Reddit account of a user losing ₹1.6 lakh in just two days through options trading highlights the behavioral risks of revenge trading and overtrading, with users advising "Stop revenge trading" and emphasizing the importance of gradual wealth building over quick recovery attempts.
