Retail participation in equity derivatives falls 18%; exits jump 76%: SEBI survey

The survey noted "Active individual1 traders in the Equity Derivatives Segment (EDS) declined 18% year-onyear, from 106.2 lakh in FY25 to 87.5 lakh in FY26, the first year-on-year decline in the trader base since FY16."

The Securities and Exchange Board of India (SEBI), in its study said the decline in participation was more pronounced among smaller traders with annual turnover below Rs 10,000.

The report said FY26 marked the first reversal in the long-term expansion of individual participation in equity derivatives. It noted that the trader base, despite the decline, remained substantially above pre-FY21 levels.

The decline in the trader base was accompanied by a sharp fall in the number of new entrants. New trader entries into the equity derivatives segment fell nearly 40 per cent year-on-year to 20.8 lakh in FY26 from 34.3 lakh in FY25 and 43.1 lakh in FY24.

At the same time, exits from the segment increased substantially. Nearly 46 lakh traders who participated in FY25 did not trade in FY26, compared with 26 lakh exits in FY25, an increase of about 76 per cent.

SEBI said the number of exits rose from 4.2 lakh in FY22 to 45.7 lakh in FY26, while the exit rate as a share of the previous year's trader base increased from 16 per cent to 43 per cent."the FY26 decline appears to have been a partial retrenchment rather than a complete reversal of the post-FY21 expansion," the report said.

The study also highlighted a moderation in overall activity in the equity derivatives segment. Notional turnover increased 4.2 per cent in FY26, compared with 20.4 per cent growth in FY25. Futures activity declined 15 per cent, while options premium turnover grew 7 per cent.

Options continued to dominate retail participation, with 99.3 per cent of individual traders having traded options during FY25-FY26. The report said 93 per cent of traders traded only options, while less than one per cent traded only futures.

Despite the fall in participation, losses remained substantial. Aggregate net losses of individual traders declined 18 per cent to Rs 91,685 crore in FY26 from a revised Rs 1.12 lakh crore in FY25. However, the average loss per trader increased marginally by 2 per cent to Rs 1.17 lakh from Rs 1.13 lakh.

The share of loss-making individuals fell to 87.7 per cent in FY26 from 90.9 per cent in FY25. Options continued to account for the bulk of losses, contributing 92 per cent of aggregate individual losses.

SEBI also found that transaction costs remained high. Individual traders incurred transaction costs of about Rs 24,800 crore each in FY25 and FY26, while STT collections from individual traders rose more than five-fold from Rs 1,291 crore in FY22 to Rs 6,645 crore in FY26.

The report cautioned that its analysis is descriptive and does not establish a causal relationship between SEBI's regulatory measures, investor characteristics and trading outcomes. (ANI)