BT MindRush: Sebi chief highlights retail investor F&O losses, calls for reforms

The Securities and Exchange Board of India (Sebi) Chairman Tuhin Kanta Pandey spoke about concerning findings regarding retail investors in the futures and options (F&O) market. According to studies by the market regulator, a significant 90% of retail investors are losing money in F&O trading. 

Speaking at the Business Today MindRush 2025 event during a session on "Capital Markets, Risks, Rewards, Resilience," Pandey highlighted the challenges faced by retail investors who often overestimate their trading capabilities.

He attributed these losses to overconfidence among investors who often overestimate their trading competence. 

Pandey emphasised the imbalance within the derivatives market, pointing out that it seems skewed in favour of institutional players. He stated, "It cannot be a one-way street. It cannot be that only the very large organised players must always be making money and the retailers must always be losing money." This assertion came amid growing concerns about the retail investors' vulnerability in a segment dominated by experienced institutions. He called for reforms to address these disparities, stressing the importance of informed investors and systemic improvements. Pandey noted, "We need to have a nuance. We have to have informed investors. We have to also have some systemic improvements." 

In response to these challenges, Sebi is actively pursuing measures to bolster investor protection. The regulator has introduced several initiatives, including Aadhaar-based KYC authentication for seamless market access and mechanisms to safeguard assets from broker defaults. Additionally, the recent DigiLocker integration aims to manage unclaimed investments better. Pandey remarked, "Digitally, if you really see, we are providing the world's best practices so far as retail protection is concerned." Such efforts represent Sebi’s commitment to shielding retail investors across their investment journeys. 

Addressing the technicalities within the market, Pandey expressed concerns about the methods used to measure trading volumes. He highlighted that the notional interest often presents a misleading picture, as options and futures are distinct instruments.

"In terms of how you measure the volumes, the notional interest is sometimes misleading because when you're comparing options and futures, they're not necessarily comparable—it's like apples and oranges. In case of options, it is the premiums that are more important," Pandey explained. Sebi has released a discussion paper to gather input on this issue, aiming to optimise the transparency and fairness of market operations.