Every trade has two sides, and SEBI's August 2026 study adds them up. For FY26, before costs, individual traders lost about Rs 72,000 crore in equity derivatives. Proprietary traders made about Rs 44,000 crore of it, and foreign portfolio investors, companies, funds and firms made the rest. The gains and the losses cancel almost to the rupee. I find that more useful than any picture of the market, because it says who sits on which side. This lesson draws the map between them: who makes the rules, who matches the orders, who stands behind each trade, and who actually trades.
3By the end you can
- Name the five layers between an order and the other side, and what each one does.
- Say why the buyer and the seller of a future never deal with each other.
- Read SEBI's category chart and say who gained what the individuals lost, before costs.
The idea, plainly
Who makes the rules, who matches the orders, who stands behind each trade
Think of a trade as a parcel passing through five hands. SEBI writes the rules. The exchange, NSE or BSE, lists the contract and runs the order book that matches buyers with sellers. After a match a clearing corporation, NSE Clearing or BSE Clearing, becomes the counterparty to both sides. It takes margin and settles gains and losses between members every day. Under it sit the members. A trading member is the broker who takes your order, and it clears through a clearing member that settles with the clearing corporation. At the bottom are the clients. NSE lists futures and options on six indices and more than two hundred shares. BSE lists contracts on indices such as the Sensex and on shares.
Five layers sit between your order and the other side
Read 2 more paragraphs, 107 words
The map has three consequences for a trader. Margin travels up the chain, from your account to the broker to the clearing member to the clearing corporation. The risk you carry against the other side is a risk on the clearing corporation, not on a stranger who may not pay. And public data comes in categories, never in names.
One detail makes the exchange files readable later. A broker tags every order as its own, called Pro, or as a client's, and the clearing corporation keeps the two positions apart. NSE's evening participant file groups open interest as Client, DII, FII and Pro. Module I07 reads it.
Who actually trades
SEBI's August 2026 study splits the market by category. Individuals, meaning retail and high net worth traders together, are a large crowd with a narrow footprint. They are most present in index options, where they were about 38% of turnover in the last quarter of FY26, and least in stock futures, at about 13%. Prop traders, FPIs, funds, companies and firms are fewer and bigger. A prop trader trades the member firm's own money.
Individuals are over a third of index options turnover and a sliver of stock futures
Where the money landed
Derivatives are close to zero sum before costs, so every rupee of individuals' loss reached someone else as a gain. In FY26 it reached mostly prop traders and foreign portfolio investors, and more than nine tenths of the individuals' loss came from options. About three quarters of the prop category's gross profit went to ten firms, and 99% of the gross profit of FPIs and prop traders came from entities that used algorithms. Few individuals do, and SEBI says even that count overstates real algo use, because it includes positions a broker's system squared off.
Before costs, individuals lost what the other categories gained
Read one more paragraph, 56 words
Who sells the options that individuals buy? The files do not name the seller of any one option. NSE publishes four categories of open interest at the close, and SEBI's study shows which categories ended with the gross profit. That is the honest answer to who the option sellers are, and module A18 takes it further.
Worked example: one order through five hands
Follow one order for one lot of the June Nifty future on 10 Jun 2026. The future settled at 23,240.10, so a lot of 65 units was worth Rs 15.11 lakh.
| Step | What happens | Who |
|---|---|---|
| 1 | A client places a buy order in the broker's app | Client |
| 2 | The broker checks the margin in the client's account and sends the order to the exchange | Broker |
| 3 | NSE matches it with a sell order from some other participant. The exchange does not know why either side is trading | NSE |
| 4 | After the match NSE Clearing becomes the seller to the buyer and the buyer to the seller | Clearing |
| 5 | NSE Clearing sets margin for the clearing member, which collects it from the broker, which collects it from the client | Clearing |
| 6 | At the close the day's gain or loss is settled between members through the clearing corporation and shows in the client's account | All |
Two things to see. After step 4 the buyer's counterparty is NSE Clearing, not the seller, and that is why neither has to trust the other. And the broker earned its charge at step 2 whichever way the trade ends.
The common mistake
The belief: My broker is on the other side of my trade, so it wins when I lose.
An order on an exchange goes to the order book and meets another participant's order. The clearing corporation then stands between the two and neither wins nor loses on the price: it holds margin on both sides. What the broker earns is a charge on each trade, win or lose, and brokerage was the largest part of individual traders' costs in FY26. The money lost on the price went to the other side, and in SEBI's FY26 data that side was mostly prop traders and FPIs. A broker's income rises with activity, which is not the same as rising with your losses.
The term this section turns on: Clearing corporation
Key takeaways
- SEBI writes the rules. Exchanges match orders. Clearing corporations stand between buyer and seller.
- Brokers take orders and margin. Clearing members settle with the clearing corporation.
- Individuals were the only major category with a gross loss in FY26.
- Before costs one category's loss is another's gain. Prop traders and FPIs gained most.
- Exchange files show four categories of open interest, not the seller of any one option.
- A broker earns on activity, not on your loss.
Before you trade. Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. Read the SEBI study