SEBI Study Reveals 91% of Individual F&O Traders Lost Money in FY25

A comprehensive study by the Securities and Exchange Board of India (SEBI) has revealed alarming statistics about individual trader performance in the futures and options (F&O) segment. The findings show that nearly 91% of individual traders incurred losses in F&O trading during fiscal year 2025, highlighting the challenging nature of derivatives trading for retail investors.

Massive Financial Losses for Individual Traders

The financial impact on individual traders was substantial and worsening. The study found that net losses of individual traders widened by 41% to Rs 1.06 lakh crore in FY25 from Rs 74,812 crore in FY24. This significant increase demonstrates the growing financial burden that F&O trading is placing on retail investors.

The scale of these losses represents a major concern for market regulators and underscores the risks associated with derivatives trading for individual investors who may lack the sophisticated risk management tools available to institutional players.

Declining Trader Participation

The study revealed a concerning trend in trader participation levels. The number of unique individual traders declined from around 61.4 lakh in the first quarter of FY25 to around 42.7 lakh in the last quarter of the fiscal year, representing a significant drop in retail participation.

Additionally, the total number of individual investors between December 2024 and May 2025 declined 20% year-on-year, though they remained 24% higher compared to two years ago. This suggests that while the immediate trend shows declining participation, the longer-term growth in retail trading remains evident.

Small Traders Hit Hardest

The study highlighted that traders with total turnover of less than Rs 1 lakh witnessed particularly high degrowth compared to the previous year. This finding suggests that smaller, less experienced traders are increasingly stepping away from F&O trading, possibly due to consistent losses and growing awareness of the risks involved.

The exodus of smaller traders indicates that the harsh realities of derivatives trading are becoming more apparent to retail investors with limited capital and experience.

Quarterly Loss Patterns

An interesting observation from the study was the quarterly pattern of losses. During the first three quarters of fiscal 2025, both the aggregate net loss across individual traders and the average net loss per person were rising consistently.

However, in the fourth quarter, there was a reduction in losses of individual traders – both at aggregate and per person levels. This improvement in the final quarter suggests that either market conditions became more favorable or traders adopted better risk management practices.

Market Activity Trends

The study revealed mixed trends in market activity levels. Index options turnover fell 9% in premium terms and 29% in notional terms compared to the previous year. However, when compared to two years ago, index options volume was up 14% in premium terms and 42% in notional terms.

The turnover of individuals in premium terms in the equity derivatives segment declined 11% year-on-year but rose 36% over the similar period two years ago, indicating the longer-term growth trend despite recent declines.

India's Dominance in Options Trading

The study emphasized that India continues to see very high trading in index options compared to global markets. This exceptional level of options trading activity has prompted SEBI to commit to continued monitoring of index options for investor safety and market stability.

During the past five years, within the equity derivatives segment, the options segment in premium terms grew at the fastest rate. Average daily premium traded grew at a CAGR of 72% for index options and 54% for single stock options, demonstrating the explosive growth in this segment.

Notional Turnover Growth

Similar impressive growth was observed in notional turnover, with index options turnover growing at a CAGR of 101% and stock options turnover growing at a CAGR of 61%. These extraordinary growth rates reflect the massive expansion in derivatives trading among Indian retail investors.

However, the study noted that within the equity derivatives segment, during the last six months, average daily premium traded for index options saw a degrowth of 9%, indicating a recent cooling in activity levels.

Regulatory Implications

The findings have significant implications for market regulation and investor protection. The high percentage of losing traders and the substantial financial losses suggest that many retail investors may be inadequately prepared for the complexities and risks of derivatives trading.

SEBI's commitment to continued monitoring indicates that further regulatory measures may be implemented to protect retail investors while maintaining market integrity and functionality.

Investor Education and Risk Awareness

The study's findings underscore the critical need for enhanced investor education and risk awareness programs. With 91% of individual traders losing money, there is clearly a significant gap between trader expectations and the reality of F&O trading performance.

These statistics serve as a stark reminder for potential F&O traders to thoroughly understand the risks involved and ensure they have adequate knowledge and risk management strategies before participating in derivatives markets.

The consistent pattern of losses across fiscal years suggests that the challenges facing individual traders in F&O markets are structural rather than temporary, requiring sustained efforts to improve investor education and risk awareness.

Disclaimer: The views and investment tips expressed in this article are for informational purposes only and do not represent financial advice. The views expressed are those of the sources cited and not necessarily those of this website or its management. Investing in equities or other financial instruments carries the risk of financial loss. Readers must exercise due caution and conduct their own research before making any investment decisions. We are not liable for any losses incurred as a result of decisions made based on this article. Please consult a qualified financial advisor before making any investment.

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Jane Street Challenges SEBI's Market Manipulation Charges

Jane Street Challenges SEBI's Market Manipulation Charges, Calls Allegations 'Inflammatory'

Global trading firm Jane Street is mounting a strong defense against allegations of market manipulation leveled by India's Securities and Exchange Board of India (SEBI). The U.S.-based trading company has strongly rejected the charges, describing them as "extremely inflammatory" and based on "erroneous or unsupported assertions."

Jane Street's Response to SEBI Action

Following SEBI's decision to bar the firm from Indian markets and seize $567 million of its funds, Jane Street's senior management addressed approximately 3,000 employees through an internal memo on Sunday. The company expressed being "beyond disappointed" by the regulator's accusations and confirmed it is "working on a formal response" to challenge the findings.

The memo revealed the firm's frustration with the regulatory process, stating: "It's deeply upsetting to see the firm mischaracterised this way. We take pride in the role we serve in markets around the world, and it's painful to have our firm's reputation tarnished by a report based on so many erroneous or unsupported assertions."

Details of SEBI's Market Manipulation Allegations

SEBI has alleged that Jane Street engaged in sophisticated market manipulation involving India's Bank Nifty index. The regulator claims the firm bought large quantities of Bank Nifty constituents in cash and futures markets to artificially support the index during morning trading sessions.

Simultaneously, the firm allegedly built substantial short positions in index options, creating a complex trading strategy that SEBI believes was designed to manipulate market prices for profit. This type of alleged manipulation involves coordinated trading across multiple market segments to create artificial price movements.

Expanded Investigation Scope

The regulatory scrutiny has extended beyond the initial allegations. Sources familiar with the matter indicate that SEBI has widened its investigation to include other indexes and exchanges, suggesting the scope of alleged misconduct may be broader than initially reported.

This expansion demonstrates SEBI's commitment to thoroughly examining Jane Street's trading activities across multiple market segments and time periods, potentially uncovering additional instances of alleged market manipulation.

Jane Street's Claims of Cooperation

In its internal communication, Jane Street emphasized its efforts to engage constructively with SEBI throughout the investigation process. The company stated: "Once again, we left this process feeling that we had reached an understanding of the concerns and reflected them in modifications to our trading behaviour."

The firm also highlighted its attempts to maintain dialogue with the regulator, noting: "Since February, we have made ongoing efforts to communicate with SEBI and have been consistently rebuffed." This suggests a breakdown in communication between the firm and the regulatory authority.

Enhanced Market Surveillance by SEBI

The Jane Street case reflects SEBI's broader initiative to strengthen market surveillance capabilities. The regulator's chairman announced on Monday that India's markets regulator is enhancing its surveillance systems to scrutinize manipulation in derivatives trading more effectively.

This enhanced focus on derivatives market manipulation demonstrates SEBI's recognition of the growing complexity of trading strategies employed by sophisticated market participants and the need for advanced monitoring systems.

Financial Impact and Market Access Restrictions

The immediate consequences for Jane Street are substantial. The firm faces a complete ban from buying and selling securities in the Indian market, effectively shutting down its operations in one of the world's fastest-growing financial markets.

The seizure of $567 million represents what SEBI considers "unlawful gains" from the alleged manipulation activities. This significant financial impact underscores the seriousness of the allegations and the potential consequences for firms found guilty of market manipulation.

Industry Implications

The Jane Street case has broader implications for international trading firms operating in Indian markets. The aggressive enforcement action signals SEBI's willingness to take decisive action against sophisticated market participants, regardless of their global reputation or size.

This development may prompt other international firms to review their trading strategies and compliance procedures to ensure they meet SEBI's evolving standards for market conduct.

Legal and Regulatory Challenges Ahead

Jane Street's decision to formally challenge SEBI's findings sets the stage for a potentially lengthy legal battle. The firm's strong denial of wrongdoing and characterization of the allegations as "inflammatory" suggests it will mount a vigorous defense.

The outcome of this case could establish important precedents for how international trading firms operate in Indian markets and the standards applied by SEBI in evaluating complex trading strategies.

Market Confidence and Regulatory Credibility

The dispute between Jane Street and SEBI raises questions about the balance between market development and regulatory oversight. While SEBI's actions demonstrate its commitment to market integrity, the firm's strong rebuttal suggests potential disagreements about trading practices that may be considered legitimate in other jurisdictions.

The resolution of this case will likely influence how international investors and trading firms view the regulatory environment in Indian markets and their willingness to participate in the country's capital markets.

Disclaimer: The views and investment tips expressed in this article are for informational purposes only and do not represent financial advice. The views expressed are those of the sources cited and not necessarily those of this website or its management. Investing in equities or other financial instruments carries the risk of financial loss. Readers must exercise due caution and conduct their own research before making any investment decisions. We are not liable for any losses incurred as a result of decisions made based on this article. Please consult a qualified financial advisor before making any investment.

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