Retail traders in India’s equity derivatives market incurred around Rs 24,859 crore in transaction costs during FY26, adding a substantial expense to an already difficult year for individual futures and options (F&O) traders. The figure comes from a new Securities and Exchange Board of India (SEBI) study that examined trading behaviour and profitability among individual participants in the derivatives segment.
The transaction-cost burden came alongside Rs 91,685 crore in net losses suffered by individual traders during the year. Nearly 88% of individual traders in SEBI’s profitability study lost money, while the number of active individual participants fell 18% to about 87.5 lakh. The data suggests that although SEBI’s tighter derivatives rules reduced participation and aggregate losses, the traders who remained active continued to face substantial financial costs.
Retail Traders Paid Nearly Rs 25,000 Crore In Transaction Costs
Individual traders spent approximately Rs 24,859 crore on transaction costs while participating in the equity derivatives market in FY26. These costs are incurred in addition to the gains and losses generated by trading positions and can become particularly significant for investors who trade frequently.
The scale of the expense becomes clearer when compared with the Rs 91,685 crore net trading loss recorded by individual traders. Transaction costs were equivalent to roughly 27% of the aggregate net losses reported for the year.
FY26 Retail F&O Cost Snapshot
| Metric | FY26 |
|---|---|
| Individual traders’ net losses | Rs 91,685 crore |
| Transaction costs | Rs 24,859 crore |
| Total of losses + transaction costs | Rs 1.17 lakh crore |
| Active individual traders | 87.5 lakh |
| Traders who lost money | 87.7% |
| Average net loss per trader | Rs 1.17 lakh |
| Average loss among loss-makers | Rs 1.47 lakh |
The Rs 1.17 lakh crore combined figure is a simple addition of reported net losses and transaction costs; it should not be interpreted as a separate SEBI measure of investor wealth destruction.
Nearly 88% Of F&O Traders Lost Money
SEBI’s profitability study found that 87.7% of individual traders incurred net losses in FY26. Although this was an improvement from 90.9% in FY25, the proportion remains exceptionally high.
The average net loss also increased despite the decline in the number of participants. Individual traders lost an average of Rs 1,16,654 in FY26, compared with Rs 1,13,913 in FY25, according to data reported from the SEBI study.
Retail F&O Profitability
| Indicator | FY25 | FY26 | Change |
|---|---|---|---|
| Traders incurring losses | 90.9% | 87.7% | Improved |
| Aggregate net losses | Rs 1.12 lakh crore | Rs 91,685 crore | Down |
| Average loss per trader | Rs 1.14 lakh | Rs 1.17 lakh | Increased |
| Active traders | 1.06 crore | 87.5 lakh | -18% |
The numbers show that lower participation reduced the overall loss pool, but the average financial outcome for participants did not improve proportionately.
Trading Participation Fell 18%
The number of active individual traders declined from about 1.06 crore in FY25 to 87.5 lakh in FY26, an 18% drop. SEBI described this as the first annual decline in individual participation in the equity derivatives segment in about a decade.
The exit of retail traders accelerated during the year. About 46 lakh traders who had participated in FY25 did not return in FY26, compared with approximately 26 lakh who exited between FY24 and FY25, according to Reuters’ reporting on the SEBI data.
Retail Participation Trend
| Metric | FY25 | FY26 |
|---|---|---|
| Active individual traders | 1.06 crore | 87.5 lakh |
| Yearly change | — | -18% |
| Traders not returning | ~26 lakh in prior period | ~46 lakh |
The decline followed a series of regulatory measures introduced by SEBI to reduce excessive speculation and improve risk management in the derivatives market.
Options Remained The Main Source Of Retail Losses
Options continued to dominate individual participation in the derivatives market.
SEBI’s study found that options accounted for 92% of aggregate losses incurred by individual traders in FY26. The study also found that 99.3% of individual traders traded options at least once, while around 93% traded only options.
This concentration means that the transaction-cost burden associated with options activity is especially important when assessing the overall economics of retail F&O trading.
Options Trading In FY26
| Indicator | Finding |
|---|---|
| Traders who traded options at least once | 99.3% |
| Traders who traded only options | 93% |
| Share of individual losses from options | 92% |
| Predominant options buyers | ~97% |
The prevalence of short-duration options trading also means that investors can generate large numbers of transactions over relatively short periods, increasing the importance of brokerage, exchange fees, taxes and other trading-related expenses.
Frequent Traders Generated Most Of The Activity
SEBI’s trading-behaviour study found that highly active participants accounted for a disproportionate share of both turnover and losses.
Traders who were active on more than 100 days represented around 42% of the study’s behavioural sample but generated approximately 94% of turnover and 87% of losses.
This concentration is important because frequent trading can increase the cumulative impact of transaction costs.
Trading Frequency And Market Activity
| Group | Share |
|---|---|
| Traders active more than 100 days | 42% |
| Share of turnover generated | 94% |
| Share of losses | 87% |
The data suggests that a relatively smaller group of highly active traders accounts for most of the economic activity in the retail F&O segment.
For these traders, transaction costs can become a significant drag on returns even before considering whether their underlying trading strategy is profitable.
Transaction Costs Add To The Challenge Of Short-Term Trading
Every F&O trade can involve multiple costs, including brokerage and exchange-related charges, statutory levies and taxes. The exact cost depends on the broker, product, transaction size and applicable regulatory charges.
For investors who trade frequently, the cumulative cost can be substantially higher than the apparent cost of an individual transaction.
Why Trading Frequency Matters
| Trading Behaviour | Potential Effect |
|---|---|
| More trades | Higher cumulative costs |
| Short holding periods | Less time for a trade to overcome costs |
| Frequent options buying | Repeated premium expenditure |
| Expiry-day trading | Higher activity and rapid price changes |
| High turnover | Larger absolute transaction-cost burden |
SEBI’s data therefore provides a broader picture of retail F&O outcomes: investors are not only exposed to market losses but also incur significant costs simply by participating.
Expiry Days Remain A Major Focus Of Retail Activity
The concentration of trading around expiry dates adds another dimension to the transaction-cost issue.
According to Reuters’ reporting on SEBI’s study, around 59% of index-options turnover occurred on expiry days, while 75% occurred either on the expiry day or the preceding day.
Index Options Turnover Concentration
| Trading Window | Share Of Turnover |
|---|---|
| Expiry day | 59% |
| Expiry day + previous day | 75% |
| Other days | 25% |
High activity around expiry can result in rapid changes in option prices and increased trading frequency. It has also been a major focus of SEBI’s efforts to curb speculative behaviour.
SEBI Has Tightened F&O Rules
The transaction-cost data comes after SEBI introduced several measures aimed at reducing excessive retail participation in derivatives.
The regulator increased contract sizes, rationalised weekly index derivative products, required upfront collection of option premiums, increased risk coverage on expiry days and strengthened monitoring of position limits.
These measures were intended to reduce speculative activity and protect investors from taking excessive exposure.
Key SEBI F&O Measures
| Regulatory Measure | Broad Objective |
|---|---|
| Larger contract sizes | Reduce excessive small-ticket speculation |
| Fewer weekly index expiries | Reduce expiry-focused trading |
| Upfront option premium collection | Strengthen risk controls |
| Higher risk coverage | Address tail-risk exposure |
| Intraday position monitoring | Improve oversight |
| Changes to expiry-day calendar spreads | Reduce certain strategies |
The decline in participation suggests that the reforms have had an impact on retail activity, although the latest profitability data shows that losses remain widespread among those who continue trading.
Aggregate Losses Fell, But The Cost Burden Remains High
Individual traders’ aggregate net losses fell to Rs 91,685 crore in FY26 from Rs 1.12 lakh crore in FY25. This was the first decline in aggregate losses after several years of increases.
However, the Rs 24,859 crore transaction-cost bill means that the overall financial burden of participating in the market remains substantial.
Five-Year Loss Trend
| Financial Year | Individual Net Losses |
|---|---|
| FY22 | Rs 40,824 crore |
| FY23 | Rs 65,747 crore |
| FY24 | Rs 74,812 crore |
| FY25 | Rs 1.12 lakh crore |
| FY26 | Rs 91,685 crore |
The FY26 decline is significant, but losses remain more than double the FY22 level.
Small Investors Remain Particularly Vulnerable
SEBI’s analysis found that traders with equity portfolios below Rs 1 lakh accounted for 70% of aggregate losses over the two-year period covered by one part of its study.
The regulator also found that 18.6 lakh derivatives traders, equivalent to 24% of the wider behavioural-study sample, had no cash-market turnover in FY26. More than half had cash-market turnover below Rs 1 lakh.
Retail Investor Profile
| Indicator | Finding |
|---|---|
| Traders with equity portfolios below Rs 1 lakh | 70% of aggregate losses |
| Traders with no cash-market turnover | 18.6 lakh |
| Share of behavioural sample with no cash-market turnover | 24% |
| Traders with cash-market turnover below Rs 1 lakh | More than 50% |
These findings suggest that derivatives activity can be significant even among investors with relatively small visible holdings in the cash market.
SEBI cautions that its equity-portfolio analysis does not include other assets such as bank deposits, property, debt investments or liabilities.
Professional Traders Had A Very Different Outcome
The retail losses stand in sharp contrast to the reported performance of proprietary traders and foreign portfolio investors.
According to Reuters’ report on the SEBI study, proprietary traders generated around Rs 44,000 crore in gross trading profits in FY26, while foreign portfolio investors generated approximately Rs 14,000 crore. Algorithmic trading accounted for 99% of these gains.
Retail Vs Professional Trading
| Participant | FY26 Reported Outcome |
|---|---|
| Individual traders | Rs 91,685 crore net losses |
| Proprietary traders | ~Rs 44,000 crore gross profits |
| Foreign portfolio investors | ~Rs 14,000 crore gross profits |
| Algorithmic trading share of reported professional gains | 99% |
The comparison does not mean every professional trader was profitable. Rather, it demonstrates the large difference in aggregate outcomes between individual participants and certain professional market participants.
The Bigger Picture
The Rs 24,859 crore transaction-cost bill adds an important dimension to SEBI’s latest assessment of retail F&O trading. Individual traders lost Rs 91,685 crore in FY26, while nearly 88% of participants lost money. At the same time, the number of active traders declined 18%, suggesting that many participants have already reduced or stopped their derivatives activity.
The data also shows that costs and losses are closely connected to trading intensity. Options accounted for 92% of retail losses, highly active traders generated 94% of turnover and expiry days attracted the majority of index-options activity. For frequent traders, transaction costs can accumulate quickly, making consistent profitability even more difficult.
Looking Ahead
SEBI’s latest findings are likely to keep the focus on whether further measures are needed to reduce excessive retail speculation in derivatives. The regulator’s existing measures appear to have reduced participation and aggregate losses, but the persistence of high average losses and the substantial transaction-cost burden show that the core profitability challenge remains.
For retail investors, the data reinforces the importance of understanding the full cost of F&O trading rather than focusing only on individual winning or losing trades. The market’s structure, trading frequency, option premiums, transaction charges and taxes all affect the final outcome. As SEBI continues to monitor the segment, the emphasis is likely to remain on making retail participation more informed and reducing the risks associated with excessive short-term derivatives trading.
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