Sebi can do more to dissuade retail speculation in futures and options

livemint.com:

A recent Sebi report highlighted the significant losses individual traders incurred in the equity futures and options (F&O) segment between FY22 and FY24. A whopping 91.1% of these traders lost money in FY24, and the average loss per head was ₹1.20 lakh. During FY22-FY24, 11.3 million traders incurred a combined net loss of ₹1.81 trillion. Only 7.2% of traders made a profit during this period.

While individuals made losses in F&O, the foreign portfolio investors (FPIs) and proprietary traders earned about ₹28,000 crore and ₹33,000 crore, respectively, in FY24. Against this, individuals and others incurred a loss of more than ₹61,000 crore in FY24 (before accounting for transaction costs).

The proportion of young people (under 30 years old) trading in F&O has increased significantly from 31% in FY23 to 43% in FY24. Nearly 93% of these young traders incurred losses in F&O in FY24, higher than the average loss-makers of 91.1% that year. Among these, low-income traders (those earning less than ₹5 lakh a year) accounted for 76% of F&O traders in FY24 and had the highest percentage of loss-makers.

Also read: Sebi curbs to help boost BSE's Sensex options, says CEO

In short, while institutional traders (FPIs and proprietary traders) generated profits, a vast majority of individual traders suffered losses, particularly those engaging in high-turnover activities or with limited income and trading experience. Despite the high losses, a majority of traders continued participating in the F&O market.

Investor protection is one of the prime mandates of Sebi, and the findings above caused it to take several measures to curb speculation in F&O by retail participants. The key measures were:

Curb on weekly options contracts: Sebi limited