India’s top stock exchange is on the watchout for fresh measures from the stock market regulator to cool the derivatives frenzy, even as a slew of recent measures begin to take effect.
Average daily traded volume (ADTV) in NSE’s equity futures segment fell 15% to ₹1,71,825 crore, an NSE presentation for the December quarter showed. Similarly, ADTV for equity options dropped 7% to ₹61,295 crore. Chief business development officer Sriram Krishnan said the decline partly reflects recent Sebi measures.
According to managing director and chief executive officer Ashish Chauhan, the impact of the Sebi measures are hard to estimate since some of them were yet to be implemented, and some more might be announced later on. Responding to a question about the effects on the weekly Bank Nifty contracts, Chavan said many factors, including the new Sebi regulations, are still settling. “Probably we will come to know if there are no new measures coming out, by May or June,” he said.
Sebi’s measures came after it found that nine out of 10 individual traders lost money in the futures and options (F&O) segment during FY24. More than 75% of the loss-makers persisted with F&O trading despite making losses in the preceding two consecutive years, a Sebi study found.
Experts have previously told Mint that another measure to curb retail participation could be a minimum net worth or income criterion to trade in derivatives.
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Dinesh Thakkar, chairman and managing director of Angel One, India’s second largest brokerage in terms of clients, said that while regulatory changes often lead to temporary disruptions and volume corrections, history shows that clients adapt quickly.
“We estimate a short-term impact of 13% to 14% on total net income due to these changes for the period of implementation till client behaviour adjustment, apart from market-driven softer volumes as evident since October 2024,” Thakkar said. He said the grouping of monthly contract expiries into a single day of each week, which would apply to both BSE and NSE, may impact Angel One’s income by 3-4%. “We will know more about the real impact of these interventions by the end of March,” he added.
On 1 October, Sebi rolled out six measures recommended by an expert panel to cool the exuberance in India’s derivatives market. Of these, the measure for intra-day monitoring of position limits will be effective from April 1. The other five —such as reducing weekly expiries per exchange from five to just one; increasing lot size to ₹15-20 lakh from ₹5-10 lakh; removing the calendar spread benefit on expiry day; ensuring the position limit per client is not exceeded during a trading session; upfront collection of option premia from buyers; and increasing the extreme loss margin—have already been rolled out.
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Chauhan said the new rules, particularly addressing the momentum in options trading around expiry dates, have contributed to the observed decline in options volumes across exchanges. “The rules were introduced to curb excessive momentum, and all exchanges have seen a slight decrease in options trading volumes,” he said.
NSE also remains in a holding pattern with respect to its proposed public offering. Chauhan clarified that the exchange does not yet have approval from Sebi to file its Draft Red Herring Prospectus (DRHP). “We will proceed with filing the DRHP once we receive Sebi’s approval,” he confirmed.
In December 2024, Sebi had proposed to make clearing corporations more independent and reduce the concentration of power held by stock exchanges over them. These rules are still in discussion, Chauhan said. “It has not converged to a kind of draft circular or guideline. It is early days. We have given our feedback as NSE to Sebi,” he said.
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