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Informist, Monday, Sept. 29, 2025

 

By Rajesh Gajra

 

NEW DELHI - The share of BSE in index options premium turnover has grown rapidly in the current financial year so far, touching a record high of 29.3% in August. The attraction of Sensex options for intra-day traders, exchange's efforts to attract institutional interest, and regulatory bar on weekly options on indices other than just one diversified benchmark index per exchange have contributed to the rise in BSE's market share, according to equity derivatives market participants.

 

The index options premium turnover in August on BSE was INR 3.266 trillion as compared to INR 7.893 trillion on NSE, data from the latest monthly bulletin of the Securities and Exchange Board of India shows. This works out to a market share of 29.3% for BSE. Similarly, in the current month till Friday, back-of-the-envelope calculation from the equity derivatives turnover data from the websites of the two exchanges, shows BSE's market share in index options premium turnover to be 29.0%.

 

BSE's market share was 25.0% in July, 24.9% in June, 23.5% in May, 23.6% in April, calculations on data from SEBI bulletin showed. Further, in 2024-25 (Apr-Mar) BSE's market share was 14.1%, the same data showed.

 

Index options form a chunk of equity derivatives turnover, in notional terms, for both the exchanges, given that weekly expiry contracts are available only on index options. Till November 2024, multiple indices on NSE had weekly expiry options on them while the BSE had it on two indices.

 

SEBI changed the equity derivatives rules in October last year, the biggest change being the restriction of weekly expiry options to only one diversified benchmark index per exchange. SEBI was of the view that hyperactive trading activity was taking place close to expiry, and if an extreme black swan event were to occur minutes before expiry, it could destabilise the market notwithstanding then-existing safety buffers in terms of margins being in place. The BSE chose Sensex, while the NSE chose Nifty 50 as the benchmark index on which weekly expiry options contracts would be available.

 

For the BSE, the reliance on index options is overwhelming since over 99.5% of the notional turnover across all equity derivatives contracts comes from index options. On the NSE, the reliance is less with index options notional turnover making up for around 97.3% of total equity derivatives notional turnover in the current financial year so far.

 

Barring index options, the BSE has not been able to revive its other equity derivatives sub-segments like index futures, stock options, and stock futures, Nilesh Sharma, president & executive director at SAMCO Securities said. The BSE's market share in equity index futures is around 1% while that in individual stock options is negligible.

 

MARKET SHARE GAIN

Nonetheless, the jump in market share in index options premium turnover by BSE has been notable. It was largely aided when the tightened SEBI rule on restricting weekly expiry to just one benchmark index per exchange, which took effect from November last year. Before the rule change, on the NSE, Bank Nifty options was the dominant weekly options contract, Trivesh D., chief operating officer at broking firm Tradejini Financial Services said. Bank Nifty weekly options contract removal "opened up a flow-shift advantage for Sensex... (as) a large chunk of expiry-day speculative volume had no place to go except to remaining weekly contracts like Sensex or Nifty, thus benefiting those," Trivesh said.

 

Till November, NSE had weekly expiry options contracts in Nifty 50, Nifty Bank, Nifty Financial Services, and Nifty Midcap Select indices. In NSE's equity derivatives segment, the Nifty Bank had a larger premium turnover share than Nifty 50 in index options. In the realignment that took place amid SEBI's regulatory initiatives, Nifty Bank's share in index options premium turnover declined to 40% in FY25, during which Dec-Mar period there were no weekly options contracts on it, from 54% in FY24, the NSE said in its monthly newsletter for April.

 

On the other hand, the index options turnover share of Nifty 50 rose to 47% in FY25 from 33% in FY24, the exchange said in the newsletter. Without weekly expiry options, the index options turnover share of Nifty Bank had fallen to 10.5% in August, data from the latest monthly newsletter of NSE showed.

 

On the BSE, there were only two indices on which weekly expiry options were available - Sensex and Bankex. In FY25 from April to October before SEBI's bar on more than one weekly benchmark options, Bankex had a lower index options premium turnover share of 28.7% while Sensex had the larger share of 71.3% in the equity derivatives segment of BSE. So, the removal of weekly contracts in Bankex did not hit BSE, as much as the removal of Nifty Bank weekly options did to NSE.

 

The Sensex options contracts have also benefitted from it being an attractive index from an intraday trader's perspective, Rajesh Palviya, head of technical and derivatives at Axis Securities, said. The premiums are higher in Sensex options as compared to Nifty 50 options because the value of contract is higher for Sensex, Palviya said. Intra-day traders, who play on volatility, prefer contracts with higher premium as this gives them the advantage of larger value movement in premiums for every small movement in the index value, Palviya said.

 

In its index options market share gain trajectory, BSE has also been aided by the exchange's outreach to all brokers in the securities market and particularly to foreign institutional investors. As per SEBI's latest bulletin, the share of FPIs in total equity derivatives turnover on BSE in FY26, till August, has risen to 2.7% from 2.0% in FY25.

 

This broker and participant outreach made "Sensex weekly contract more accessible or attractive, further pulling in volume," Trivesh of Tradejini said. The BSE's efforts in getting a wider section of investors, including institutional investors, to trade on its platform is paying off, according to Brijesh Ail, assistant vice-president, technical and derivatives, at IDBI Capital Market Services.

 

REGULATORY UNCERTAINTY LOOMS

The road ahead for BSE may be challenging, if market rumours of SEBI wanting to do away with weekly options trading completely come true. If this happens, both the exchanges will have an impact on their volume, but BSE will definitely witness a higher impact, Sharma of SAMCO Securities said. Sharma did not spell it out directly, but the impact will be on the downward side with volumes expected to fall sharply if the new scenario takes place.

 

"If the regulator were to withdraw weekly expiries and revert to a simultaneous monthly expiry structure, BSE's turnover and transaction fees could be meaningfully reduced," according to Trivesh. On the other hand, if weekly options stay, but there is further regulatory tightening of rules on options trading leading to lower turnover and retail participation, BSE's market share may continue to rise, according to IDBI Capital's Ail.

 

SEBI has not issued any new circular on the next phase of equity derivatives rules recently, but it has said that a consultation paper on encouraging longer-tenure equity derivatives contracts will be issued soon. The market regulator believes hyper trading activity is still taking place on expiry days in weekly index options contracts.  End

 

Edited by Deepshikha Bhardwaj

 

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