Should F&O trading require a licence? Vijay Kedia slams retail frenzy for turning markets into a casino

Veteran investor Vijay Kedia has raised serious concerns about retail investors gambling rather than investing strategically in the futures and options (F&O) segment. His remarks come amid a surge in retail participation, with many newcomers entering the market without proper risk management strategies.

“F&O was meant for hedging, not hoping — but retail is turning the market into a casino. Maybe it’s time we ask: should access come with a license, not just a login?” Kedia said.

The capital markets regulator Sebi has also repeatedly flagged the high failure rate in F&O trading, noting that over 90% of retail traders lose money in this segment. It has mandated brokers to display prominent risk warnings on their platforms regarding F&O trading.

“Over 90% of retail traders lose money in F&O. This isn’t risk management — it’s just gambling, masked as strategy. We may call it a hedge, but the data calls it a warning,” Kedia added.

A study revealed that between FY22 and FY24, 93% of individual traders in the equity F&O segment incurred losses, totaling Rs 1.8 lakh crore. The average loss per trader stood at Rs 2 lakh, while only 1% managed to earn profits exceeding Rs 1 lakh after accounting for transaction costs.

In response, Sebi has introduced a series of regulatory measures aimed at curbing speculative retail trading in the F&O segment. These include raising the minimum contract size for index derivatives to Rs 15 lakh and limiting weekly expiries to one per exchange.Additionally, an extreme loss margin (ELM) of 2% has been imposed on short index options contracts on expiry days. These steps form part of a broader effort to enhance investor protection and ensure market stability.According to reports, Sebi is also considering a ‘suitability test’ for retail F&O traders. The proposed measure would require traders to demonstrate a clear understanding of the risks associated with derivatives trading—potentially through mandatory exams or by meeting minimum income and capital thresholds.

Kedia had earlier highlighted the psychological trap that many retail investors fall into—believing they can quickly build capital through F&O trading before transitioning to long-term investing.

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