SEBI’s F&O Reforms Yield Mixed Results: Aggregate Retail Losses Decline, Per-Investor Loss Rises
MUMBAI – New regulatory measures implemented by the Securities and Exchange Board of India (SEBI) aimed at curbing speculative trading in the futures and options (F&O) segment have resulted in a significant reduction in aggregate losses incurred by retail investors during the fiscal year 2025-26. However, a detailed parliamentary update revealed a subtle, yet notable, increase in the average loss per individual investor, highlighting the complex impact of the reforms.
The crucial information was presented to Parliament on Tuesday by Pankaj Chaudhary, the junior minister for finance. He detailed that SEBI’s interventions, which began in November 2024, included fundamental changes to F&O trading rules, such as increased margins and larger contract sizes.
These strategic adjustments effectively curtailed the overall losses experienced by retail investors in the equity F&O segment. The aggregate figure for FY26 stood at Rs 91,685 crore, a substantial decrease from approximately Rs 1.1 lakh crore recorded in FY25. This 17% reduction in overall losses suggests a positive trend in mitigating systemic risk for the retail sector.
Paradoxically, while the collective losses decreased, the average loss per individual investor saw a marginal uptick. In FY26, the average per-person loss reached Rs 1.2 lakh, an increase from Rs 1.1 lakh in the preceding year. This indicates that while fewer individuals might be participating or incurring losses, those who continue to engage in F&O trading are facing slightly higher individual financial setbacks.
The detailed reply in the Rajya Sabha by Minister Chaudhary also provided insight into broader market dynamics, indicating a reduction in both the number of retail investors actively participating in the F&O segment and the overall trading turnover.
The number of unique retail traders in the equity F&O segment significantly decreased from 98.1 lakh in FY25 to 78.6 lakh in FY26. This nearly 20% reduction in participant numbers directly correlates with SEBI’s objective of discouraging excessive, uninformed speculation. Concurrently, trading volumes attributed to retail investors in the F&O segment also saw a decline, dropping from Rs 213 lakh crore in FY25 to Rs 202 lakh crore in FY26.
Minister Chaudhary affirmed, “Following the regulatory measures, Sebi has observed a year-on-year decline in the number of unique individual investors from 98.1 lakh to 78.6 lakh and net losses of the individuals from Rs 1,11,788 crore to Rs 91,685 crore in the equity derivatives segment in 2025-26, compared to the previous year.” This statement underscores the direct impact of the regulatory changes.
However,average per-person loss jumped marginally to Rs 1.2 lakhin FY26, from Rs 1.1 lakh theprevious year
The measures enacted by SEBI since November 2024, which have contributed to these observed changes, include a range of strategic adjustments. These encompass the rationalisation of weekly index derivatives products, an increase in "tail risk" coverage on options expiry days, an elevation in contract sizes for index derivatives, and the rationalisation of monthly index derivative products. These steps collectively aim to reduce the leverage available to retail traders and make F&O trading less accessible or attractive for those with limited capital or understanding of the associated risks.
While the overall decline in retail investor losses is a positive indicator for market stability and investor protection, the slight increase in average individual losses signals that those who remain active in F&O trading may be engaging with higher risk or with insufficient capital. This nuanced outcome suggests that while SEBI’s measures have reduced the breadth of retail participation and aggregate losses, continuous monitoring and potential refinement of regulations may be necessary to further safeguard individual investors. The market regulator’s ongoing efforts are poised to shape a more disciplined and potentially safer F&O landscape for Indian retail participants.
