3 weeks ago
Transaction Costs Turn 4.4 Lakh Derivatives Traders Into Losers
Many people trade derivatives, which are financial contracts that can make or lose money quickly.
They may appear to make a profit before fees are counted.
SEBI found that 4.4 lakh traders became loss-makers after brokerage, taxes and other charges were deducted in FY26.
Trading costs totaled about Rs 25,000 crore.
The average cost paid by each trader increased to Rs 31,628.
Brokerage was the biggest part of the bill.
Securities Transaction Tax also became a much larger part of the costs.
Experts say frequent and speculative trading can hurt retail investors.
They have suggested more education and possibly stricter requirements for derivatives trading.
SEBI found that 4.4 lakh gross profit-making equity-derivatives traders became loss-makers after transaction costs were deducted in FY26.
Transaction costs remained around Rs 25,000 crore despite a 5% decline in premium-derivatives turnover.
Costs represented 35% of gross losses for loss-making traders, compared with 21% of gross profits for profitable traders.
Average transaction cost per trader rose 22% from Rs 26,027 to Rs 31,628 in FY26.
Brokerage made up 44% of costs, while Securities Transaction Tax rose to 27% after its October 2024 increase.
- Who
- SEBI, retail traders in the equity-derivatives market, and market experts including Chandan Taparia and Arun Kejriwal.
- What
- A SEBI study found that transaction charges turned 4.4 lakh gross profit-making derivatives traders into loss-makers in FY26.
- Where
- India’s equity-derivatives market.
- When
- In FY26; the article also refers to an STT hike in October 2024 and further increases effective from FY27.
- Why
- Brokerage, exchange charges, statutory levies and other transaction costs reduced traders’ gross profits, with experts linking the impact to frequent and speculative trading.
Cost and Regulation Concerns
Deterrence and Investor Protection
Effect of higher transaction charges
Cost and Regulation Concerns
Chandan Taparia said rising technology costs and transaction charges add to the burden on traders, while over-trading and speculative retail participation remain major problems.
Deterrence and Investor Protection
Arun Kejriwal said higher transaction costs, together with regulator awareness efforts, have made investors think twice before speculative derivatives trading.
How to reduce retail losses
Cost and Regulation Concerns
Taparia suggested stronger risk education, a mandatory learning module or exam, or a minimum net-worth requirement for derivatives traders if higher charges do not reduce speculation.
Deterrence and Investor Protection
The article presents higher costs as a possible deterrent that may discourage speculative trades, though it does not state that all experts support additional restrictions.
Key facts
- Traders affected
- 4.4 lakh gross profit-making traders became loss-makers after costs were deducted in FY26.
- Total transaction costs
- About Rs 25,000 crore in FY26.
- Average cost per trader
- Rs 31,628 in FY26, up from Rs 26,027.
- Largest cost component
- Brokerage accounted for 44% of transaction charges in FY26.
- STT share
- Securities Transaction Tax accounted for 27% of transaction charges in FY26, up from 13% in FY22.
- Individual STT collection
- It increased from Rs 1,291 crore in FY22 to Rs 6,645 crore in FY26.
- Upcoming STT changes
- From FY27, STT is set to rise 150% on futures and 50% on options premiums.
Sources
Related news
SEBI Finds Retail Derivatives Costs Rising Despite Fewer Traders
SEBI Finds 88% of Individual Derivatives Traders Lost Money
SEBI Curbs Slow Retail Derivatives Rush as Losses Persist
SEBI Finds Retail F&O Losses Fall, But Options Risks Persist
Prop Traders Profit as Indian Retail Derivatives Losses Narrow
SEBI Report Urges Stronger Measures Against Retail F&O Speculation
Motilal Oswal’s Taparia Recommends Three Stocks to Buy
India Ratings Upgrades Motilal Oswal Financial Services Rating
LCC Projects IPO Set for NSE, BSE Listing Tomorrow
Motilal Oswal Names Four Banking Stocks Amid Credit Growth
Rate-Sensitive Shares Slide as October RBI Hike Bets Rise
