F&O trading retains retail grip despite Sebi moves

It has been over a year since the Securities and Exchange Board of India (Sebi) intervened to promote discipline in the country's booming derivatives market, yet retail investors continue to wade into high-risk futures and options (F&O) trading.

- Ram Sahgal

In fact, newcomers have pushed industry-wide equity options volumes - index and stocks - in the December quarter above pre-October 2024 levels.

This is notwithstanding tougher F&O trading curbs - including tripling contract sizes and limiting weekly options launches per exchange to just one.

While the overall number of participants has declined since the new measures were implemented, market leader National Stock Exchange of India Ltd (NSE) has seen participation rebound since the March low.

The individual's share in premium turnover of index options jumped 508 basis points to 41.1% in November, up from 36% in the same month last year, when Sebi structures took effect, according to NSE data.

The share of proprietary traders, on the other hand, declined by 62 bps to 47.5% from 48.1% a year ago.

BSE, whose market share in options has crept up steadily since May 2023 from zero to around 25-26%, doesn't provide such data publicly, while Sebi takes into account activity on both exchanges to frame new measures.

The average daily premium turnover (ADTV) of index and stock options on National Stock Exchange of India Ltd (NSE) and BSE has risen 23%- the fastest growth in seven quarters-to ₹75,739 crore in the third quarter of 2025-26 (Q3FY26), up to 15 December, from ₹61,446 crore in the previous quarter (Q2FY26), according to data from HDFC Securities Ltd.

Interestingly, this exceeds the ₹73,857 crore turnover recorded in the year-ago quarter (Q2FY25), before Sebi announced the stern measures.