NSE Retains Dominance in Options Trading Despite SEBI’s F&O Overhaul
The Indian stock market experienced a significant shift last week as SEBI’s new regulations in the Futures & Options (F&O) segment came into effect. These changes, aimed at curbing excessive speculation and enhancing market stability, have resulted in notable shifts in trading patterns across indices and exchanges.
Divergent Trends in Turnover
The daily average turnover for Nifty Bank took a significant hit, dropping nearly 33% to ₹12,259 crore from the previous week’s ₹18,250 crore. The decline was even more dramatic for Bankex, where turnover plunged 98% to a mere ₹41 crore from ₹1,927 crore.
In sharp contrast, the Nifty and Sensex contracts experienced robust growth. The Nifty’s average daily turnover surged by 40%, reaching ₹41,301 crore from ₹29,474 crore, while the Sensex saw a 14% increase, climbing to ₹8,314 crore from ₹7,301 crore.
NSE Outshines BSE
Overall, the National Stock Exchange (NSE) maintained its edge, recording a marginal increase in options turnover to ₹62,511 crore from ₹59,615 crore. On the other hand, the Bombay Stock Exchange (BSE) witnessed a decline, with turnover dropping to ₹8,355 crore from ₹9,228 crore.
Why the Shift?
According to Akshay Chinchalkar, Head of Research at Axis Securities, multiple factors contributed to this transition:
1. Reduced Instrument Variety: SEBI’s regulations limited the number of instruments and expiration options.
2. Higher Margins: The increase in minimum contract sizes to ₹15 lakh led to higher margins, impacting retail participation.
3. Market Correction: The recent market downturn since September has reduced investor enthusiasm amidst rising volatility.
Additionally, foreign investors trimming positions toward the year-end period and thinner volumes have further influenced these trends.
End of an Era: Bank Nifty Weekly Options
The closure of India’s popular Bank Nifty weekly options contract marked a significant milestone last week. Introduced in 2016, these contracts were instrumental in drawing millions of retail investors. However, as part of SEBI’s broader regulatory efforts to curb excessive retail participation in derivatives, the weekly expiries have now been limited to one per exchange—Nifty for NSE and Sensex for BSE.
The Impact of SEBI’s New Rules
In October, SEBI rolled out a six-point circular aimed at improving market stability and reducing speculative trading losses. Key changes include:
Increased Contract Size: Tripled to ₹15 lakh.
Margin Requirements: Higher upfront margin collection.
Weekly Expiry Restrictions: Limited to one benchmark per exchange.
Intraday Position Monitoring: Stricter oversight on open positions.
Removal of Calendar Spread Treatment: On expiry days.
Shrey Jain, Founder & CEO of SAS Online, noted, “Traders have adjusted their strategies under the new regime, shifting their focus to Nifty and Sensex while moving away from Bank Nifty and Bankex.”
What Lies Ahead?
While these changes have impacted volumes in the short term, they aim to bring long-term stability to India’s derivatives market. With traders adapting to the new rules, a clearer picture of market behavior will emerge in the coming months.
For stock market participants, the key takeaway is to remain agile and adapt strategies to the evolving regulatory landscape, ensuring sustainable and informed trading practices.
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