1 week ago
Persisting Retail F&O Losses Renew Calls for Tighter Eligibility Rules
Many individual investors in India trade futures and options, which can involve large risks.
SEBI introduced rules to reduce excessive short-term speculation.
The number of individual traders went down for the first time in nine years.
However, most remaining activity still focused on contracts ending within a week.
Almost nine out of ten individual traders lost money in FY26.
Their average loss was about ₹1.16 lakh.
Some market experts want investors to show they understand the risks and can afford potential losses before trading.
Others say the rules should be carefully designed so markets remain liquid and people are not unfairly blocked from participating.
SEBI found that individual derivatives traders fell for the first time in nine years after regulatory intervention.
Nearly 97% of retail activity remained concentrated in contracts expiring within a week.
SEBI reported that 87.7% of individual traders incurred losses in FY26, with average losses rising over 2% to ₹1.16 lakh.
Industry participants are urging suitability checks, income thresholds, qualification tests and accredited-investor criteria for F&O access.
Experts warned that reforms must protect investors without unnecessarily harming liquidity, market-making or the wider market ecosystem.
- Who
- SEBI, retail derivatives traders, market intermediaries and experts including Dhiraj Relli, Ananth Narayan and Ashish Nanda.
- What
- Industry participants are calling for tighter suitability and eligibility requirements for retail futures and options trading after persistent losses.
- Where
- India’s securities and derivatives markets.
- When
- The findings and debate were reported on August 25, 2026; SEBI’s intervention began in October 2024.
- Why
- Most retail traders continued using very short-term contracts and suffered losses despite regulatory measures, prompting calls for stronger investor-protection safeguards.
Stricter Eligibility and Suitability
Calibrated Access and Market Development
Access requirements
Stricter Eligibility and Suitability
Supporters want suitability assessments, income thresholds, qualification tests or accredited-investor criteria to ensure traders understand risks and can bear losses.
Calibrated Access and Market Development
Critics of arbitrary barriers argue that investor protection should not unnecessarily prevent participation and that access rules must be practical and proportionate.
Effect of existing measures
Stricter Eligibility and Suitability
Persisting losses and continued concentration in ultra-short-term contracts suggest that product-level restrictions have not sufficiently changed retail behaviour.
Calibrated Access and Market Development
SEBI’s measures have reduced the number of individual traders, and their impact should be assessed before further major changes are made.
Market structure
Stricter Eligibility and Suitability
Greater suitability-based access and a shift toward the cash market could reduce harmful speculative behaviour and encourage longer-term portfolios.
Calibrated Access and Market Development
Sharp restrictions could affect liquidity, market-making, intermediary revenues and the broader ecosystem; experts instead support developing cash-market and longer-tenor derivatives liquidity in a calibrated way.
Key facts
- Retail trader losses
- 87.7% of individual traders ended FY26 with losses.
- Average loss
- The average loss per trader rose over 2% to ₹1.16 lakh.
- Short-term concentration
- Nearly 97% of retail activity remained in contracts with less than a week to expiry.
- Trader participation
- The number of individual traders fell for the first time in nine years after regulatory intervention.
- Proposed safeguards
- Suggestions include income thresholds, investor qualification tests, accredited-investor status and suitability checks.
- SEBI intervention
- SEBI introduced measures in October 2024 to address retail losses, high expiry-day index-options volumes and ultra-short-term trading.
- Market concern
- Derivatives-related revenue is important to exchanges, clearing corporations, brokers and other intermediaries.
Quotes
Ananth Narayan
Former SEBI whole-time member
“I think the debate on the derivatives framework should continue. SEBI has already taken a number of significant measures, and it is appropriate to assess their impact. At the same time, this market has evolved very rapidly, and the regulatory framework will necessarily need to evolve with it.”
thehindubusinessline.com
“The objective should not be to suppress derivatives activity, but to ensure that the cash and derivatives markets develop in a balanced manner, across maturities.”
thehindubusinessline.com
Sources
Related news
Indian Retail F&O Losses Reach ₹91,685 Crore Despite SEBI Curbs
SEBI Curbs Slow Retail Derivatives Rush as Losses Persist
SEBI Report Urges Stronger Measures Against Retail F&O Speculation
SEBI curbs retail F&O losses by 18 percent in FY26
SEBI Study Reveals Why Retail F&O Traders Keep Losing
SEBI Finds 88% of Individual Derivatives Traders Lost Money
India Draws Record $127 Billion Through Special FCNR Window
Major Banks Cut FCNR Deposit Rates After Subsidy Ends
Uber Driver Returns ₹37,000 Sent by Mistake, Refuses Reward
ICICI Bank Nears HDFC Bank as Nifty’s Top Influence
Brokerages Suggest HDFC Bank, PB Fintech, Parag Milk Foods
