F&O De-addiction: Options Volumes Plummet Over 50% in FY26 Following SEBI’s Tough New Regulations

In FY26, India witnessed a significant contraction in options trading volumes, with total contract volumes declining by 51%, according to the recent annual report from the market regulator Sebi. This downturn occurred despite an overall increase in the combined notional turnover of equity derivatives, which rose by 4% to Rs 1.1 lakh crore. This stark contrast underscores the impact of Sebi’s regulatory measures aimed at curbing excessive retail speculation, particularly on expiry days, where sharp price swings often resulted in heightened trading activity and risk exposure for retail investors.

The reasons behind the plummet in options volumes are attributed to several regulatory changes implemented by Sebi, including increased contract sizes, a more structured weekly expiry schedule, mandatory upfront premium collection, and an augmented securities transaction tax. These changes collectively raised the cost of trading and necessitated greater capital for market participants, thereby discouraging hyperactive trading behaviors that characterized prior market phases. The shift demonstrates Sebi’s commitment to a more disciplined approach in derivatives trading, with a clear intention to enhance market stability while mitigating risks associated with excessive speculation.

The focus on reducing expiry-day trading has yielded a tangible impact, reflected in new guidelines that enforce a uniform expiry day—either Tuesday or Thursday—and restrict the availability of weekly index options contracts. Moreover, the introduction of real-time intraday position monitoring for equity index options signifies a proactive measure to safeguard retail traders from volatile conditions often seen during expirations. The increased delivery-to-traded quantity and value ratios in cash markets, now at around 30%, indicate a noteworthy shift in investor behavior, favoring ownership over speculative intraday trading.

Overall, FY26 appears to mark a pivotal transformation within India’s derivatives landscape, signaling a shift from a high-volume, speculative trading environment to a more balanced, quality-driven market approach. While the options market remains substantial, the regulatory interventions have effectively tempered the explosive participation from retail traders, fostering a healthier trading climate conducive to long-term investor confidence and stability.

Source: The Economic Times

(Expert Note: This report was prepared by the Wealthova team.)