Proprietary trading firms’ derivatives profits fall to $5B in India as regulatory crackdown bites

India built the world’s largest equity derivatives market by contract volume. Now it’s actively trying to shrink it. Proprietary trading firms operating in India’s futures and options segment saw their aggregate profits drop to roughly $5 billion for the fiscal year ended in March, a sharp decline from the approximately $7 billion that prop firms and foreign institutional investors collectively earned in the prior year. The culprit: a regulatory offensive by the Securities and Exchange Board of India (SEBI) designed to cool speculative fervor that was quietly devastating retail traders. The regulatory squeeze SEBI and the Reserve Bank of India didn’t just nudge the market. They tackled it. Starting in 2024 and extending through 2026, regulators rolled out a series of measures targeting the options segment specifically, including limits on weekly index option contracts and new premium requirements that made it more expensive to trade. The most dramatic move came in July 2025, when SEBI temporarily barred US-based prop trading giant Jane Street Group from Indian securities markets entirely. The charge: alleged market manipulation linked to the Bank Nifty index during key expiry days,...