Retail derivatives traders continue to bleed, finds Sebi
The Sebi report covered trading activity from December 2024 to May 2025, analyzing the impact of a string of measures issued by Sebi in October 2024 to strengthen the equity index derivatives framework and enhance investor protection.
Heavy losses despite tighter rules
Sebi's measures which debuted between November 2024 and April 2025 included rationalizing weekly and monthly index derivatives, increasing contract sizes, mandating upfront premium collection, and tightening position limit monitoring. These steps were designed to address concerns over the explosive growth in index options trading, particularly on expiry days, and mitigate systemic risks.
Net losses for individuals equity derivatives segment (EDS) widened by 41% to ₹1.05 trillion in FY25, up from ₹74,812 crore the previous year. The average loss per person stood at ₹1.10 lakh, compared to ₹86,728 in FY24.
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A quarterly breakdown for FY25 showed a decline in the number of unique traders from 61.4 lakh in Q1 to 42.7 lakh in Q4, coinciding with the rollout of regulatory measures.
Aggregate net losses and average losses per trader rose through the first three quarters, but both metrics improved slightly in Q4, even as the percentage of loss-making traders remained above 86%.
The study shows index options turnover fell 9% in premium terms and 29% in notional terms year-on-year. However, when compared to two years ago, volumes remain robust, up 14% (premium) and 42% (notional). For individual investors, turnover in premium terms dropped 11% from the previous year but was still 36% higher than two years prior.
The number of unique individual traders in the equity derivatives segment (EDS) fell sharply—down 20% year-on-year, though up 24% from two years ago.
The decline was most pronounced among traders with turnover below ₹1 lakh, a group that had previously seen the highest growth.
Market volume strong
Despite the recent contraction, India continues to lead globally in equity derivatives trading, especially in index options.
In March 2025, Indian exchanges recorded an average number of contracts traded that was more than 4.3 times higher than the second-ranked global exchange.
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Looking at the broader period from FY20 to FY25, both the EDS and the cash market (CM) posted strong growth. The average daily traded value in the cash market grew at a compounded annual growth rate (CAGR) of 25%, while the EDS grew at 23%.
Within derivatives, index options (premium terms) outpaced all others, growing at a CAGR of 72%, with single-stock options at 54%.
Retail shifts to index options
For individual investors, the shift towards index options was dramatic. In FY20, only ₹5 out of every ₹100 traded by individuals in the EDS went to index options; by FY25, it had jumped to ₹41. In response to these trends, and to ensure that the rapid growth in the derivatives market is matched by risk monitoring metrics, Sebi introduced several measures on 29 May 2025.
The measures include shift to a more risk-sensitive metric—delta-adjusted open interest—for monitoring positions across futures and options, imposing a new limit structure of net FutEq OI of ₹1,500 crore and a gross limit of ₹10,000 crore (both long and short positions in index options) and new entity-level caps for single-stock F&O exposure from 10% of MWPL for clients, NRIs and small FPIs, to 30% for mutual funds, proprietary books and large institutional FPIs.
Also Read: Sebi wants to review and rename 'penalties' to avoid stigmatising brokers
Future equivalent open interest (FutEq OI) refers to the net exposure of a participant in the derivatives segment after adjusting for the delta—a measure of how much an option or future's price moves in relation to the underlying asset.
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