Sebi weighs refining F&O warnings on brokerage apps as retail losses remain high

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The Securities and Exchange Board of India (Sebi) is discussing with brokers ways to refine futures and options (F&O) risk warnings on trading platforms as retail losses in the segment remain high, two people close to the matter told Mint.
“The aim is to make the warnings more dynamic, rather than a simple warning that remains the same all the time. Such a warning is expected to attract more retail attention and ensure people are careful before they trade in the segment,” said one of the two officials cited above on the condition of anonymity.
The discussions follow the markets regulator’s 20 August study on individual traders’ losses in the F&O segment in 2025-26, which showed that while total losses moderated year-on-year, the average loss per trader increased.
Total losses among individual equity derivatives traders stood at ₹91,685 crore in FY26, marginally lower than ₹1.12 trillion in FY25. However, the average loss per trader rose 2% to ₹1.17 lakh from ₹1.13 lakh a year ago.
The share of individual traders who lost money also remained elevated. Sebi found that 87.7% of individual traders incurred losses while trading in the derivatives segment in FY26, compared with 90.9% in FY25.
At the same time, the number of individual traders participating in derivatives declined for the first time since FY16. About 8.77 million individual traders participated in the segment in FY26, down 18% from the previous fiscal.
Most of these traders were options buyers. In FY26, 93% of individual traders were classified as “only options buyers” and another 4% as “majorly options buyers”. About 90% of the former and 75% of the latter incurred losses.
Warning as a deterrent
The regulator is now considering whether the warnings displayed by brokerage platforms can do more than provide a static caution to investors.
“One of the ways the warning can be made more dynamic is by updating the information on the loss-making individual traders more frequently. Sebi is expected to also provide a template on what the warnings should look like,” the official mentioned above added.
However, market participants said such warnings may not deter retail traders from the derivatives market.
“Putting dynamic warnings on apps may not discourage traders from engaging in the F&O segment. A warning on a cigarette packet saying that smoking is injurious does not discourage people from smoking. Similarly, such warnings may not make a material change for individual traders,” said the second official said on the condition of anonymity.
Sebi has introduced several measures to curb excessive speculation by retail traders in derivatives. These included tripling the minimum contract size, permitting one weekly contract per exchange instead of multiple earlier, and doubling the extreme loss margin on the expiry day of contracts.
The government also increased the securities transaction tax (STT) on derivatives in April 2026. Options STT is 0.15% of the premium value, and futures STT is 0.05%.
But regulatory measures and higher transaction costs have not substantially eliminated the losses incurred by retail traders, the latest data showed.
“People who want to participate in the derivatives market will do it regardless. Many such traders are small traders who are willing to increase their lot sizes to continue trading in the segment,” said K. Suresh, president and chief executive at financial services company India Cements Capital.
“There needs to be a certification for those entering the derivatives segment. They should pass the test to get permission to trade in options. There may also be a threshold in derivatives that allows only those who have traded in the cash market for at least six months. Only such norms can truly wear off retail traders and significantly lower overall losses,” he added.
Mint's queries emailed to Sebi remained unanswered.

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