Indian retail traders suffered a crushing Rs 1.05 lakh crore loss in derivatives trading during FY25, fresh SEBI data reveals, as the market regulator simultaneously exposes how American quant trading firm Jane Street allegedly manipulated the very markets where individual investors are hemorrhaging money.
The timing couldn't be more damning. Just as SEBI accused Jane Street of making Rs 36,500 crore profit through systematic market manipulation, the regulator's research report shows retail F&O traders' cumulative net losses ballooned from Rs 75,000 crore in FY24 to a staggering Rs 1.05 lakh crore in FY25.
The carnage deepened as more Indians rushed into the derivatives casino. Individual derivative traders surged from 86.3 lakh in FY24 to 96 lakh in FY25, but their misery only multiplied. Average losses per person jumped from Rs 86,728 in FY24 to Rs 1,10,069 in FY25, a devastating 27% increase.
The three-year destruction has been breathtaking. In FY22, only 42.7 lakh F&O traders populated Dalal Street, making cumulative losses of Rs 40,824 crore. Within three years, both the number of traders and losses have more than doubled.
"Further, the percentage of traders making losses in the equity derivative segment remained broadly unchanged at 91% from the earlier study done by SEBI," the regulator noted, underlining the brutal mathematics of derivatives trading, where nine out of ten participants lose money.
Also Read | Explained: What is Jane Street and how it made Rs 36,500 crore profit by gaming Dalal Street
Jane Street's Alleged Manipulation Machine
The retail bloodbath gains sinister context against Jane Street's alleged market manipulation. Last week, SEBI released an interim order accusing the American firm of systematic market manipulation designed to profit from enormous index options positions.
According to the regulator, Jane Street would deal simultaneously across multiple market segments - cash equities, stock futures, index futures, and index options - but in a manipulative manner.
The firm allegedly engaged in aggressive buying of Nifty Bank component stocks and futures during morning hours, artificially inflating prices. They would then reverse these positions later in the day through aggressive selling, causing prices to fall. This coordinated buying and selling was designed to manipulate the index at strategic times to benefit their massive options positions.
Jane Street has, however, disputed the allegations.
Also Read | Jane Street vs Sebi case places Rs 6 lakh crore multibagger corner of Dalal Street on edge
Warren Buffett's 'Financial Weapons of Mass Destruction'
The explosive growth in retail derivatives trading has raised alarm bells about household savings being gambled in high-risk markets. Warren Buffett's famous warning about futures and options as "financial weapons of mass destruction" appears prophetic as Indian families pour money into a game where the house, and sophisticated players like Jane Street, appear to have overwhelming advantages.
Amid reports of household savings being diverted to derivatives speculation, SEBI announced measures in November 2024 to cool the frenzy.
SEBI's Damage Control Measures
The regulator implemented a range of measures targeted at reducing market volatility, especially from daily index expiries, including limiting weekly expiries to only Nifty and Sensex contracts, increasing the lot size from Rs 5-10 lakh to Rs 15-20 lakh, and increasing margins for expiry day trading.
Early signs suggest the measures are having some impact. SEBI's report covering December 2024 to May 2025 shows that index options turnover is down 9% year-on-year in premium terms and 29% in notional terms. Individual turnover in premium terms is down 11% year-on-year, and the number of unique individual traders trading is down 20% compared to the previous year.
However, the damage remains enormous. "India continues to see a relatively very high level of trading in EDS (equity derivatives segment), compared to other markets, particularly in index options," SEBI acknowledged.
While derivatives markets "assist in better price discovery, improve market liquidity and allow investors to manage their risks better," SEBI noted that "with an explosion in index options trading on expiry day over time, concerns arose around investor protection & systemic stability."
The Jane Street case raises uncomfortable questions about whether retail traders are unwitting victims in a game rigged by sophisticated algorithms and deep-pocketed players. As millions of Indians chase quick profits in F&O markets, the combination of massive retail losses and alleged institutional manipulation paints a troubling picture of India's derivatives boom.
The Rs 1.05 lakh crore question remains: Are retail traders simply bad at trading, or are they systematically disadvantaged in markets where players like Jane Street allegedly manipulate prices with impunity?
The timing couldn't be more damning. Just as SEBI accused Jane Street of making Rs 36,500 crore profit through systematic market manipulation, the regulator's research report shows retail F&O traders' cumulative net losses ballooned from Rs 75,000 crore in FY24 to a staggering Rs 1.05 lakh crore in FY25.
The carnage deepened as more Indians rushed into the derivatives casino. Individual derivative traders surged from 86.3 lakh in FY24 to 96 lakh in FY25, but their misery only multiplied. Average losses per person jumped from Rs 86,728 in FY24 to Rs 1,10,069 in FY25, a devastating 27% increase.
The three-year destruction has been breathtaking. In FY22, only 42.7 lakh F&O traders populated Dalal Street, making cumulative losses of Rs 40,824 crore. Within three years, both the number of traders and losses have more than doubled.
"Further, the percentage of traders making losses in the equity derivative segment remained broadly unchanged at 91% from the earlier study done by SEBI," the regulator noted, underlining the brutal mathematics of derivatives trading, where nine out of ten participants lose money.
Also Read | Explained: What is Jane Street and how it made Rs 36,500 crore profit by gaming Dalal Street
Jane Street's Alleged Manipulation Machine
The retail bloodbath gains sinister context against Jane Street's alleged market manipulation. Last week, SEBI released an interim order accusing the American firm of systematic market manipulation designed to profit from enormous index options positions.
According to the regulator, Jane Street would deal simultaneously across multiple market segments - cash equities, stock futures, index futures, and index options - but in a manipulative manner.
The firm allegedly engaged in aggressive buying of Nifty Bank component stocks and futures during morning hours, artificially inflating prices. They would then reverse these positions later in the day through aggressive selling, causing prices to fall. This coordinated buying and selling was designed to manipulate the index at strategic times to benefit their massive options positions.
Jane Street has, however, disputed the allegations.
Also Read | Jane Street vs Sebi case places Rs 6 lakh crore multibagger corner of Dalal Street on edge
Warren Buffett's 'Financial Weapons of Mass Destruction'
The explosive growth in retail derivatives trading has raised alarm bells about household savings being gambled in high-risk markets. Warren Buffett's famous warning about futures and options as "financial weapons of mass destruction" appears prophetic as Indian families pour money into a game where the house, and sophisticated players like Jane Street, appear to have overwhelming advantages.
Amid reports of household savings being diverted to derivatives speculation, SEBI announced measures in November 2024 to cool the frenzy.
SEBI's Damage Control Measures
The regulator implemented a range of measures targeted at reducing market volatility, especially from daily index expiries, including limiting weekly expiries to only Nifty and Sensex contracts, increasing the lot size from Rs 5-10 lakh to Rs 15-20 lakh, and increasing margins for expiry day trading.
Early signs suggest the measures are having some impact. SEBI's report covering December 2024 to May 2025 shows that index options turnover is down 9% year-on-year in premium terms and 29% in notional terms. Individual turnover in premium terms is down 11% year-on-year, and the number of unique individual traders trading is down 20% compared to the previous year.
However, the damage remains enormous. "India continues to see a relatively very high level of trading in EDS (equity derivatives segment), compared to other markets, particularly in index options," SEBI acknowledged.
While derivatives markets "assist in better price discovery, improve market liquidity and allow investors to manage their risks better," SEBI noted that "with an explosion in index options trading on expiry day over time, concerns arose around investor protection & systemic stability."
The Jane Street case raises uncomfortable questions about whether retail traders are unwitting victims in a game rigged by sophisticated algorithms and deep-pocketed players. As millions of Indians chase quick profits in F&O markets, the combination of massive retail losses and alleged institutional manipulation paints a troubling picture of India's derivatives boom.
The Rs 1.05 lakh crore question remains: Are retail traders simply bad at trading, or are they systematically disadvantaged in markets where players like Jane Street allegedly manipulate prices with impunity?
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