Retail traded options big time despite curbs , Sebi study

Index options trading remained resilient despite a fall in the number of clients trading in the equity derivatives segment (EDS) of the National Stock Exchange (NSE) and BSE following regulatory tightening, a Securities and Exchange Board of India (Sebi) study on retail losses in the space shows.

The number of active retail or individual traders fell by a fifth to 78.6 lakh in FY26 from 98.1 lakh in the preceding fiscal year, the study, which draws a sample of individual traders from India's top 15 brokers, shows. Simultaneously, gross EDS turnover fell by only 5%.

"The much smaller fall in turnover shows that trading activity stayed concentrated among the traders who continued to participate, especially higher-turnover traders," per the Sebi findings.

EDS

EDS comprises futures and options—stocks and index futures, and stock and index options.

The relatively lesser fall in turnover despite the 20% fall in active traders during FY26 is due to a steep 20% fall in futures turnover by individual traders. In comparison, options turnover grew by 16%.

This divergence led to a year-on-year fall of just about 5% in EDS turnover to ₹202.26 trillion in FY26.

Futures turnover by individual traders shrank by about 20% in FY26, after strong growth in earlier years, while options turnover grew by about 16%, though slower than the 30% growth in FY24.

As a result, options strengthened their already dominant position, while futures accounted for an increasingly small share of overall trading activity.

"This divergence suggests that the FY26 slowdown mainly reflected lower participation in directional futures trading, while speculative activity in options stayed resilient despite the regulatory changes introduced during the year," notes the study.

The average net loss per trader rose by 2.4% to ₹1.17 lakh in FY26, from the previous fiscal, despite fewer individuals trading.

MEASURES

Some of the measures instituted by Sebi to curb retail excess in derivatives trading included tripling contract size, permitting one weekly contract per exchange from multiple earlier and doubling the extreme loss margin on the expiry day of contracts.

In addition to the Sebi measures, the government increased the securities transaction tax on derivatives in October 2024. Options securities transaction tax (STT) currently stand at 0.15% on premium value and that on futures at 0.05% after they were raised again in Budget FY27 .