91% of individual F&O traders lost money in FY25 despite Sebi curbs: Study

Synopsis

Market regulator SEBI analyzed trading activity in the equity derivatives segment. The analysis revealed that most individual traders faced net losses in FY25. Index options turnover saw a year-on-year decrease. However, it increased compared to two years prior. The number of individual investors trading in equity derivatives also declined year-on-year.

Notwithstanding market regulator Securities and Exchange Board of India's (Sebi) measures to curb speculative trading activity in the futures & options (F&O) segment, nearly 91% of individual traders incurred net loss in in the equity derivatives segment (EDS) in FY25 at the aggregate level, similar to the trends observed in FY24.

A Sebi release on Monday said that the regulator analysed the profit and loss of individual traders in EDS to arrive at the conclusion.

Sebi October 1, 2024 circular had introduced measures to strengthen the equity index derivatives framework.

Sebi's revelation was in response to certain media reports which had highlighted the impact of these measures.

"In order to present the factual impact of these measures, the trading activity of both (i) all investors and (ii) individual investors, for the period December 2024 to May 2025, has been analyzed," the release said.

Sebi said that it has completed the full study on the impact of the measures on the trading activity in EDS vis-à-vis the domestic cash market.

The other key findings for the period December 2024 to May 2025 across both the stock exchanges are:

1) Index options turnover, year-on-year, is down by 9% in premium terms and 29% in notional terms. However, compared to 2 years ago, index
options volume is up by 14% in premium terms and 42% in notional terms.

2) Turnover of individuals in premium terms in EDS is down by 11% YoY and up by 36% over similar period two years ago.

3) Number of unique individual investors trading in EDS is down by 20% compared to previous year and up by 24% from 2 years ago.

4) India continues to see a relatively very high level of trading in EDS, compared to other markets, particularly in index options.

The Financial Year wise trend for 6-year period i.e. FY20–FY25 along with analysis of profit and loss of individual traders in EDS is covered in the full study carried out by SEBI.

Sebi said that it will continue to observe the trends in turnover of index options from the perspective of ensuring investor protection and market stability.

The regulator on May 29 issued a circular in order to ensure that the rapid growth in derivatives market matches with commensurate risk monitoring metrics. Some of the measure that were taken by it include better monitoring and disclosure of risks in derivatives, reducing instances of spurious ban periods for derivatives on single stocks and better oversight over the possibility of concentration or manipulation risk in index options

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