SEBI: algos drive 96% prop profits
- Securities and Exchange Board of India data showed proprietary traders generated 96% of their futures-and-options profits through algorithmic systems in fiscal 2024. - The same study said only 13% of 9.57 million individual derivatives traders used algos, while retail traders still lost ₹41,544 crore in FY24. - SEBI has since moved to regulate retail algo access through brokers, with implementation stretched into 2026. (sebi.gov.in)
Algorithmic trading means software sends buy and sell orders by rule, not by mouse click. In India’s derivatives market, SEBI says that edge is concentrated with firms trading their own capital. (zerodha.com) (business-standard.com) SEBI’s futures-and-options study for fiscal 2024 found proprietary traders made gross profits of about ₹33,000 crore, and 96% of those profits came from algorithmic entities. Foreign portfolio investors made about ₹28,000 crore, with 97% of their profits tied to algos. (business-standard.com) (economictimes.indiatimes.com) The gap with retail traders was wide. Economic Times, citing the SEBI study, reported that only 13% of 9.57 million individual traders used algorithms, and retail traders still posted an overall derivatives loss of ₹41,544 crore in FY24. (economictimes.indiatimes.com) Across three years through March 2024, SEBI said individual traders lost a combined ₹1.81 trillion in derivatives, and only 7.2% made a profit. In fiscal 2024 alone, 91.1% of retail traders lost money. (business-standard.com) SEBI responded by opening a formal path for retail algorithmic trading. In a December 13, 2024 consultation paper and a February 4, 2025 circular, the regulator proposed that brokers obtain exchange approval for each algo and tag algo orders for audit trails. (sebi.gov.in 1) (sebi.gov.in 2) The rollout did not happen on the original schedule. SEBI said the framework was first due on August 1, 2025, then moved to October 1, 2025, and later shifted to a glide path that runs through mock sessions by January 3, 2026. (sebi.gov.in) Zerodha said the new framework effectively recognizes API-based automation for retail traders, which had long operated in a gray area through scripts, spreadsheets, and broker connections. The firm also said the rules are aimed at lower-speed retail automation, not exchange co-located high-frequency trading. (zerodha.com) The numbers do not show that algorithms guarantee profits for individuals. Economic Times reported that even algo-backed individual traders lost about ₹13,900 crore in FY24, based on the same SEBI data. (economictimes.indiatimes.com) SEBI’s own sequence of papers and circulars leaves a narrower point: the tools dominating institutional derivatives profits are now being brought under a retail rulebook, after a market cycle in which most individuals lost money. (sebi.gov.in 1) (sebi.gov.in 2)
