Sebi Chairman Tuhin Kanta Pandey has brought to light striking statistics about retail investor performance in derivatives trading, revealing that a staggering 90% of retail investors suffer losses in the futures and options (F&O) segment. Speaking at the Business Today MindRush 2025 event during a session on "Capital Markets, Risks, Rewards, Resilience," Pandey emphasized that many retail investors tend to overestimate their trading skills, often driven by overconfidence, resulting in significant financial losses.
"Sometimes, in their exuberance, retail investors seem to think they are very smart, but actually, they're losing money — and this has been proven," he remarked, underscoring how emotional decision-making, coupled with a lack of comprehensive knowledge about complex derivatives, often leads to poor outcomes for small traders.
Pandey pointed out that the current market structure seems disproportionately skewed in favor of large institutional players, leaving retail investors at a considerable disadvantage. He questioned the fairness of a system where profits seem concentrated among large, organized entities, while individual participants bear the brunt of losses. "It cannot be a one-way street. It cannot be that only the very large organized players must always be making money and the retailers must always be losing money," he stated firmly, calling for an overhaul of existing practices to ensure a more balanced, equitable trading environment.
When asked whether stricter regulations might be the solution to protect small investors, Pandey took a more nuanced stance, cautioning against over-regulation. He advocated for a balanced approach that promotes informed decision-making rather than discouraging participation altogether. "We need to have a nuance. We have to have informed investors. We have to also have some systemic improvements," he explained, highlighting the need for greater financial literacy, transparency, and risk awareness among retail traders.
Among the potential reforms he discussed was the need to rethink how trading volumes are measured. He argued that the widely used "notional value" — a measure of the total value of a position — can often create a misleading impression of market activity and investor performance. "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 which are more important," he clarified.
Pandey also addressed the issue of market stability, particularly around expiry days, when a surge of last-minute trades — often by retail investors hoping for quick gains — can lead to sudden volatility and price distortions. He acknowledged the growing concern over this pattern and assured that Sebi has released a discussion paper seeking industry feedback on how to handle this issue more effectively. He emphasized that the regulator is committed to finding solutions that balance market stability with investor freedom, ensuring that the system remains resilient while protecting participants from unnecessary risks.
Beyond derivatives trading, the Sebi Chairman outlined a comprehensive set of initiatives aimed at safeguarding retail investors throughout their entire investment journey — from the moment they enter the market to the management of their portfolios. He spoke about the introduction of Aadhaar-based KYC authentication, which streamlines the onboarding process, making it quicker and easier for new investors to enter the market while ensuring robust identity verification.
Pandey further explained that Sebi has implemented safeguards to protect investor assets from broker defaults, a concern that has gained traction following recent high-profile cases of broker malpractice. These measures ensure that investors' shares and funds remain secure, even if their brokerage goes under. Additionally, he highlighted Sebi’s integration with the government-backed DigiLocker platform, designed to simplify the process of reclaiming unclaimed investments — a long-standing issue where crores of rupees remain stuck due to outdated records or lost paperwork.
"Digitally, if you really see, we are providing the world's best practices so far as retail protection is concerned," Pandey said confidently, stressing that Sebi remains committed to creating a safer, more transparent, and accessible investment landscape for individual investors.
His remarks reflect a growing push to ensure retail participants are not only better informed but also better protected. With derivatives trading becoming increasingly popular among retail investors — often drawn in by the promise of quick profits — the need for comprehensive education, clearer regulations, and enhanced safety mechanisms has never been more critical.
Pandey’s vision, backed by Sebi’s ongoing reforms, paints a future where retail investors are equipped with the knowledge, tools, and safeguards needed to navigate the complexities of the market more effectively. As the regulatory framework evolves and technology continues to play a larger role in shaping investment behavior, the hope is that retail traders can transition from being frequent victims of the system to becoming empowered, confident participants — contributing to a more robust, resilient, and inclusive capital market.
