economy · 2026-08-24
India's F&O Losses Aren't Unique to India
Photo: Niyantha Shekhar / Wikimedia (CC BY 2.0)
91% of India's individual derivative traders lost over ₹2 lakh crore in FY25-FY26, but the same two-thirds-to-nine-tenths loss rate shows up in Brazil, Korea, Taiwan and Australia too, so it looks less like a broken Indian market and more like how leveraged trading always works.
What counts as F&O trading that lost this much money?
It covers a broad basket of leveraged bets, not just Indian stock options. The story groups India's equity futures and options with equity-index futures in Brazil, KOSPI 200 futures in Korea, individual futures in Taiwan, and contracts for difference (a bet between trader and broker on whether a price rises or falls) in Europe, the UK, France and Australia.
What exactly is a CFD, and how is it like India's F&O?
A CFD is a contract where a trader and broker simply bet on whether an asset's price will rise or fall, without either side owning the underlying asset. That is structurally close to Indian equity options and futures, where traders also stake leveraged bets on price direction rather than buying the shares outright, which is why regulators compare the two.
Do losses concentrate in certain leveraged products, like options?
Yes. In Australia, options CFDs were flagged as especially damaging, with 85% of retail clients trading them losing money, higher than the 68% loss rate across all retail CFD clients in FY24. Exotic CFD products sold from 2020 to 2023 also saw 72% of retail traders lose money, suggesting the more complex or leveraged the product, the worse the odds.
Does regulation change these odds over time, or just delay losses?
Australia's regulator capped leverage ratios and standardised close-out rules in 2021, and retail CFD trading volumes fell 76%, from about 515,000 clients per quarter to 119,300. But among those who still traded, 68% still lost money in FY24, and 67% of new clients quit within a year, suggesting rules shrink participation more than they change the underlying loss rate.
Did rules elsewhere cut these loss rates over time?
Australia offers a before-and-after: after regulator ASIC capped leverage and tightened rules on CFDs (a bet on price moves, similar to F&O) in March 2021, the number of active clients fell 76%, from about 515,000 to 119,300 a quarter. But the share of remaining retail clients losing money in FY2024 was still 68%, barely different from before the rules.
So what did the Australian rules actually change?
They changed the size of losses, not who loses. Leverage limits shrink how much traders can borrow against their stake, and mandatory 'close-out' rules force a broker to shut a losing position automatically before it wipes out the account. That capped how badly retail clients could lose, and it also priced many casual traders out entirely, which explains the 76% drop in active accounts.
Do most new traders even stick around long enough for rules to matter?
No. ASIC found 67% of new retail clients who placed their first CFD trade in early FY24 had stopped trading by the end of that same year. Most of the market intervention debate is really about a small core of repeat traders, since the bulk of newcomers exit within months regardless of what rules are in place.
Where does this leave the case for tighter Indian F&O rules?
The Australian pattern suggests leverage caps and forced exits mainly shrink the pool of traders and cushion individual losses, rather than changing the underlying odds of losing. Watch whether India's regulator, SEBI, aims for that same trade-off: fewer, smaller accounts with similar loss rates, versus a genuine attempt to change the roughly two-in-three-to-nine-in-ten odds that show up in every market studied.
If it's universal, should India still curb F&O trading?
The evidence doesn't say whether India should curb F&O trading, only that its loss rates aren't an anomaly. Regulators elsewhere haven't concluded universality means leaving it alone either: Australia still runs leverage caps, marketing limits and a product intervention order despite similar 68% loss rates among its retail CFD clients, suggesting the same pattern can justify restriction rather than inaction.
What curbs has Australia actually put on leveraged trading?
ASIC capped leverage ratios, standardised how brokers must automatically close out losing positions before clients lose all their money, banned negative account balances beyond what's in the trading account, and prohibited sign-up perks like trading credits or free gifts. These rules took effect in March 2021 and are due to expire in May 2027, after which regulators will decide whether to renew them.
Did Australia's restrictions actually reduce trading or losses?
Client numbers trading CFDs fell 76%, from about 515,000 every two months before the rules to 119,300 traders per quarter in FY2024. But losses persisted regardless: 68% of retail clients still lost money that year, AU$458 million in total, showing curbs can shrink participation without eliminating the underlying loss rate.
Do newer, riskier products keep emerging despite the curbs?
Yes. Even under restrictions, 85% of retail clients trading options CFDs lost money, and 72% lost money on exotic CFD instruments sold from 2020 for three years before being pulled. This is the structural pattern to watch: regulators cap one leveraged product, and losses show up in the next one, which is why ASIC keeps reviewing new categories rather than treating one round of curbs as final.
Source: thehindubusinessline.com