Derivatives trader base falls for first time in four years in FY26: SEBI study

Derivatives trader base falls for first time in four years in FY26: SEBI study Despite the moderation, retail traders continued to be the largest cohort of traders, SEBI study observed.

Key points

• The proportion of traders who incurred losses additionally declined, albeit marginally, to 87.7% in FY26 from 90.9% in FY25.
• As much as 91.6% of traders who had documented losses in both FY22 and FY23 additionally documented losses in FY24, in FY24.
• Only regarding 57% of the traders who formed the FY25 cohort continued trading in FY26, compared with a long-term average of around 65%.
• SEBI's two studies on the profitability and trading behaviour of individual derivatives traders, published on August 20, demonstrated that both participation and aggregate losses declined in FY26.
• Despite the decline, losses remained higher than the levels recorded between FY22 and FY24.

For context, the number of individual traders participating in the derivatives market fell 19% to 78.6 lakh in fiscal 2026 from 98.1 lakh a year earlier, according to data published by the Securities and Exchange Board of India (SEBI) on Thursday.

SEBI's two studies on the profitability and trading behaviour of individual derivatives traders, published on August 20, demonstrated that both participation and aggregate losses declined in FY26. Nevertheless, the average loss per trader climbed, highlighting the continued risks faced by those remaining active in the market.

Meanwhile, the decline in participation followed a series of measures introduced by SEBI to curb retail losses in derivatives. These included limiting weekly expiries to one index per exchange, raising the minimum contract value to ₹15 lakh-₹20 lakh and increasing the extreme loss margin for expiry-day trading by 2%.

Nevertheless, SEBI cautioned against attributing the decline entirely to the regulatory measures.

"The decline cannot be attributed solely to the regulatory measures, as participation had already begun moderating before their implementation, " Prasad Patankar and Prabhas Kumar Rath of SEBI's Department of Economic and Policy Analysis II remarked in the study on profitability of derivative traders.

Notably, the proportion of traders who incurred losses additionally declined, albeit marginally, to 87.7% in FY26 from 90.9% in FY25. When SEBI began its analysis, this was the lowest level recorded since FY22.

Aggregate losses fell 18% year-on-year to ₹91, 685 crore in FY26. Despite the decline, losses remained higher than the levels recorded between FY22 and FY24.

At the individual level, nevertheless, the picture was rather grim. The average loss per loss-making trader rose to ₹1.16 lakh from ₹1.13 lakh in FY25, making it the highest average loss recorded since FY22.

Although persistence in trading moderated during FY26, sEBI's second study discovered that incurring losses did not necessarily discourage traders from continuing to participate in derivatives.

Only regarding 57% of the traders who formed the FY25 cohort continued trading in FY26, compared with a long-term average of around 65%. Consequently, 43% halted trading during the year.

Experience additionally did not appear to improve trading outcomes. SEBI discovered that traders who continued participating over multiple years remained highly probable to incur losses.

As much as 91.6% of traders who had documented losses in both FY22 and FY23 additionally documented losses in FY24, in FY24. The probability of making losses remained above 90% throughout traders with one to five years of experience.

Despite the decline in participation, individual traders continued to account for the largest cohort in the derivatives market. Trading activity remained concentrated in short-duration positions, indicating a continued preference for quick gains.

SEBI additionally identified that traders with the smallest equity holdings tended to take the highest risks. Meanwhile, the reduction in the number of individual participants was accompanied by greater trading intensity among those who remained active.

Taken together, the developments around derivatives trader base falls for first time in four years in FY26: point to a situation that is still moving, and the coming days should bring more clarity.