9 out of 10 individual traders in F&O segment making losses

Nine out of 10 individual traders in the equity F&O segment incurred net losses during both the years FY 2018-19 and FY 2021-22, according to a study by market regulator SEBI.

There has been a significant increase of over 500 per cent in the number of individual traders in the equity F&O segment in FY 2021-22, as compared to FY 2018-19.

Ninety-eight per cent of individual traders in the equity F&O segment traded in options during FY 2021-22.

On average, loss makers registered net trading loss close to Rs 50,000 in FY 2021-22. The average absolute net loss of a loss maker was over 15 times the net profit made by a profit maker.

Over and above the net trading losses incurred, loss makers expended an additional 28 per cent of net trading losses as transaction costs, SEBI said.

Those making net trading profits incurred between 15 per cent to 50 per cent of such profits as transaction cost.

Under the supervision of a working group, SEBI conducted a study analysing the trends in both participation and in profits and losses of individual traders in the equity F&O segment.

The working group had representation from academia, clearing corporations, brokers, and market experts.

To compare results in a contextual manner before and after the pandemic, the study covers the periods of FY 2018-19 and FY 2021-22.

The study is based on a sample of all individual clients of all the top-10 stock brokers, accounting for 67 per cent of the overall individual client turnover in the equity F&O segment during FY 2021-22.

SEBI said periodic data analysis and disclosure of this nature can significantly enhance investor awareness around market risks.

With this in mind, SEBI will shortly issue guidelines in respect of additional risk disclosures required to be made by brokers and exchanges to investors.