Regulations in India are “co-created” with the market regulator Securities and Exchange Board of India (Sebi) following a due process of constituting an expert working group (EWG), which lays down the “tenets” of change before seeking public views on them, according to Sundararaman Ramamurthy, managing director and chief executive officer of BSE since January 2023.
“Those public views are discussed by the expert working group and then taken to the Secondary Market Advisory Committee (SMAC). Finally, a view of the SMAC is taken and taken to Sebi board, before it becomes law,” said Ramamurthy. “The issue of extension of the tenor of contract (index options) has not come up before the expert committee so far.”
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Sebi chairman Tuhin Kanta Pandey told the media on the sidelines of an event last month that the regulator was exploring ways to extend the tenure and maturity period of equity options contracts. That has sparked speculation that weekly options expiry could go, impacting BSE’s growth.
Weekly options have helped BSE up the ante significantly against the National Stock Exchange (NSE) in the derivatives space, thanks to Ramamurthy relaunching Sensex options with two key changes shortly after taking the helm at BSE: designing a 30-share contract from a 50-share one, and opting for a Friday expiry from a Thursday one to give participants a product that complemented Nifty options expiring a day earlier. Over time, BSE’s expiry day shifted to Tuesday and, most recently, to Thursday again. NSE has shifted its derivatives expiry to Tuesday from Thursday.
The strategies implemented were successful, resulting in the market share of equity options on the BSE rising from nearly zero at the end of FY23 to almost 22% by the end of July 2025, according to data from the NSE. The success is more glaring in the context of BSE’s cash market share of a mere 6.6% compared with its rival’s 93.4%.
Options are a vital business for BSE and accounted for 63% of its total standalone revenue of ₹948 crore in the June quarter.
It also reflects in BSE’s share price. From ₹182 apice when Ramamurthy took over in January 2023, the stock has risen to ₹2,319.6 on Friday, compounding at 148% over his term so far.
Regulatory crackdown
However, along with a potential increase in contract expiry tenure, regulatory changes since last October of one expiry per exchange per week, allowing more exchanges to offer equity and equity derivatives, and the imposition of an intraday position limit of ₹5,000 crore per client have raised concerns about an adverse impact on BSE.
Sebi’s measures were prompted by a study that found 91% of 96 lakh individual traders on average lost ₹1.1 lakh each in derivatives trading in FY25, up from ₹86,728 per trader in the previous fiscal.
The position limit of ₹5,000 crore was introduced after Sebi, in an interim report in July, alleged that US hedge fund Jane Street had manipulated indices like Bank Nifty and Nifty through their cash and futures segments to make outsized gains in index options over the past few years. Jane Street has decided to move the Securities Appellate Tribunal against the Sebi interim order.
The purpose of the regulator and the exchanges is all for the well-being of the marketplace, and for that all products need to survive, and they must co-exist…
“You cannot see things unilaterally and gauge impact on the business,” said BSE’s Ramamurthy. “The purpose of the regulator and the exchanges is all for the well-being of the marketplace, and for that all products need to survive, and they must co-exist. In such a situation, any move from the regulator, just on a single aspect, cannot be taken and analyzed.
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“Rather, when the consultation process happens, it will be a gamut of huge number of various facts and situations and suggestions and decisions which will come together,” he said. “We need to look at it at that point of time and not get carried away by discussions happening outside of the expert working group.”
New Entrants
About the agri-focused National Commodity and Derivatives Exchange (NCDEX) also entering the fray and currency derivatives-focused Metropolitan Stock Exchange of India (MSEI) planning to launch index options and equity cash segments, Ramamurthy said that globally developed markets like the US have multiple derivatives exchanges, which carve out their own business.
“Hence, it is not about the number of players, it is about the product or service gap that you fill,” he said. “It could be an expiry day gap, or it could be a product requirement gap, or it could be a participant requirement gap, or it could be an economic factor gap. You identify the gap, you fill it, you survive and grow.”
“When Sensex 30 was relaunched, it filled a product gap and not expiry because both Sensex and Nifty are broad-based indices that represent a significantly large market capitalization of this market, thus complementing each other,” he said. “The correlation between both the indices is 99.7%. So, if you fill the gap, the product survives. For that initial starting point, you require to create a niche. The expiry day helped.”
“If you compared Nifty with Bank Nifty, at a point of time, Bank Nifty started growing more than Nifty, and thus it became a competing product. But Sensex, on the other hand, is a complementary product,” he said.
It is like money, he said. “When you don’t have money, it means everything. When you have money, money means nothing. Similarly, liquidity is like that, when you don’t have liquidity, every small factor counts, including expiry day. When you get into a paradigm of liquidity, nothing counts. It is a product that counts.
“Currently, whether Sensex has reached maturity or not will be told by time. Market will tell whether expiry days matter or not, but it survived and thrived because it filled the gap.”
Ramamurthy’s conviction stems from his having worked for 20 years with NSE, where he donned the cap of “first CEO of the derivatives segment at NSE, designated by Sebi on 6 September 2000.
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“Based on that experience, when I started off at BSE, the first thing that I did was to identify the gap in the derivatives market then, and likewise launch products. Similarly, if the two upcoming exchanges find a gap which they can fill, they will be able to succeed. “
Jane Street Impact
On whether the regulator had reached out to BSE for data of Jane Street trades on Sensex cash and options segments, Ramamurthy said the alleged modus operandi per the Sebi order of 3 July involved Jane Street buying stocks of an index and at the same time taking a bearish view in the derivatives market by selling at-the-money call and buying out-of-the-money puts and, subsequently, selling the stocks in the cash market. This cash selling pulled the market down and the bearish positions made money. For all of this to happen, operations across two segments (cash and derivatives) were imperative.
“In the case of Jane Street, there were four entities. Of those four entities, two were FPIs (foreign portfolio investors), and the other two were corporates. Those corporates had only done test trade with us in derivatives. The two FPIs were doing some trades in derivatives, not very significant, because our total FPI volume itself is very limited in the equities market. They have not done any meaningful or significant trade at all. So, at this point of time, I am not able to see a correlation between whether they did in equities and this and did anything with BSE or not. That is where we stand.”
Further, added Ramamurthy, “our regulatory teams regularly engage with the regulators, and any such data request would be directly communicated between the surveillance teams and Sebi.”
