Options volumes crash over 50% in FY26 after Sebi's strict rules

The drop shows the impact of Sebi regulatory push to reduce hyperactive trading, especially around expiry days. Over the past year, the regulator introduced several measures aimed at making derivatives trading more disciplined and less risky for retail investors.

Sebi said the decline in options volumes was mainly because of higher contract sizes, rationalised weekly expiries, mandatory upfront premium collection and an increase in securities transaction tax.

Expiry-day trading hit

The biggest focus of the regulator has been expiry-day activity, where retail traders often take short-term bets in index options. These trades can generate very high volumes but also expose small investors to sharp losses.

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These steps were aimed at reducing crowded expiry-day speculation and improving market stability.

Higher cost, fewer trades

The fall in option volumes also reflects the higher cost of trading. Larger contract sizes mean traders need more capital to take positions. Upfront premium collection reduces the ability to build leveraged positions without adequate funds.

The rise in securities transaction tax also made frequent option trades more expensive. Together, these measures appear to have cooled a segment that had seen explosive retail participation in recent years.

Quality over quantity

While volumes fell, Sebi broader message is that lower speculative activity may be healthier for the market. The annual report also noted that delivery-to-traded quantity and value ratios in the cash market rose to around 30%, showing a growing preference for ownership over intraday speculation.

The data suggests FY26 was a turning point for India’s derivatives market. The options market is still large, but the easy-volume phase driven by expiry-day retail frenzy has started to slow.

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