SEBI Review Highlights Widespread Global Retail Losses in Derivatives and Leveraged Trading

Retail traders participating in equity derivatives and leveraged products face widespread losses not just in India, but across global markets, according to studies reviewed by the Securities and Exchange Board of India (SEBI). While methodologies, time periods, and specific products vary across jurisdictions, international regulatory analyses and academic studies consistently point to high loss rates among individual participants in futures, options, contracts for difference (CFDs), and foreign-exchange markets.

In Brazil, a study focusing on individuals beginning day trading in equity-index futures found that 97 per cent of those continuing for more than 300 days experienced a net loss. Only 1.1 per cent of these traders earned more than the country's minimum wage from the activity, and staying in the market longer did not improve overall outcomes.

Similarly, research from South Korea indicated that approximately 75 per cent of retail day traders in KOSPI 200 futures lost money after accounting for fees. Data from Taiwan showed individual futures traders incurring average losses of NT$61,500 after transaction costs, noting that greater experience did not translate into enhanced trading skills or reduced losses.

These international patterns align closely with SEBI's findings in India, where data indicates that trading experience does not materially improve outcomes. The probability of losses remains high even after several consecutive years of participation, and higher trading intensity has consistently been associated with larger losses and higher loss rates.

Regulatory data from Europe and other regions reflects similar trends. In France, over 89 per cent of retail investors lost money in CFD and forex trading across a four-year period. In European markets overall, approximately 74 to 89 per cent of retail CFD accounts recorded losses, while an earlier UK study showed about 82 per cent of clients lost money. In Australia, 68 per cent of retail CFD investors experienced losses in FY2024, inclusive of trading fees. US regulatory data similarly shows that about two out of three retail forex accounts typically lose money in a quarter.

In the Indian market, regulatory figures show that approximately 91 per cent of individual traders in the equity derivatives segment incurred net losses during FY25-FY26. Cumulative losses exceeded ₹2 lakh crore during this timeframe, even as aggregate losses moderated slightly to 87.7 per cent in FY26, out of more than 1.2 crore unique individuals who traded in the segment over the two-year period.

"The data reviewed by SEBI highlights a critical reality about retail participation in high-leverage segments like derivatives, both in India and globally. Across different geographies and regulatory frameworks, higher trading intensity consistently correlates with larger financial losses, while experience alone rarely improves trading outcomes. For the broader financial ecosystem, this points to the pressing need for deeper investor education regarding the structural risks inherent in leveraged products." — Dr. Shishir Gupta, Founder & CEO, StartupLanes