Despite a decline in the number of active F&O traders, 87.7% of individual investors reported net losses in FY26, amounting to ₹91,685 crore. Industry experts are now urging SEBI to introduce stricter eligibility criteria, such as mandatory income thresholds or investor tests, to curb high-risk speculation. This potential regulatory shift follows recent measures, including higher contract sizes and the new Closing Auction Session implemented earlier this month.
The Securities and Exchange Board of India (SEBI) is facing renewed pressure to introduce stricter entry barriers for futures and options (F&O) trading. This follows fresh data for the fiscal year 2026, which shows that a significant majority of individual retail traders continue to incur losses despite a series of regulatory interventions aimed at cooling speculative activity.
During FY26, approximately 87.7% of individual F&O traders suffered net losses, with total losses reaching ₹91,685 crore. While the number of active individual retail traders dropped by 18% to 87.5 lakh—marking the first annual contraction in a decade—the persistence of high losses per participant has led industry stakeholders to argue that current safeguards may be insufficient. Experts, including leadership from major brokerages, are now advocating for more rigorous suitability tests, potentially including income thresholds or mandatory investor assessment tests, to ensure that only those with the financial capacity to handle volatility participate in derivatives.
This debate follows a series of significant regulatory changes implemented between late 2024 and August 2026. These include increasing the minimum contract sizes to ₹15–20 lakh, introducing a 50:50 cash margin requirement, reducing the number of weekly expiries, and increasing the Securities Transaction Tax (STT). Most recently, on August 3, 2026, SEBI implemented a new Closing Auction Session (CAS) for F&O-eligible stocks, replacing the previous volume-weighted average price (VWAP) method to determine closing prices.
From an investor perspective, these developments carry both risks and implications for market dynamics. A primary concern for market participants is the potential for reduced liquidity if strict eligibility rules are enforced. A significant portion of revenue for Indian stock exchanges and brokerage houses is driven by F&O trading volumes. Therefore, any move that significantly limits trader participation could place pressure on the financial performance of these entities. Furthermore, as the regulatory environment shifts, traders must adjust to new execution mechanisms, such as the recently implemented Closing Auction Session, which may impact how positions are closed near market expiry.
The regulatory challenge remains finding a balance between protecting undercapitalized retail investors and maintaining a liquid, functional market. While the data suggests that traders with larger equity portfolios often perform better, regulators are cautious about creating arbitrary barriers that could stifle market development. Moving forward, investors should monitor for any official circulars from SEBI regarding potential eligibility mandates or further suitability assessments. Future updates regarding the impact of these changes on market liquidity and brokerage revenues will also be important for long-term tracking.