“Certain additional measures on position limits and changes in the calculation of open interest on index futures and options took effect this month,” the person cited above said on the condition of anonymity. Position limit refers to exposure a participant can take in index derivatives, while open interest refers to an outstanding buy or sell position.
“Sebi will examine if the recent measures bring down the volumes meaningfully over the next few weeks. If the volumes don’t dip or dip only marginally, more proposals, like doing away with weekly expiry in favour of, say, fortnightly expiry, and having just one benchmark index expiry per fortnight from two per week now could be discussed within the regulatory apparatus before a decision is taken. This could happen sooner than later through a consultative approach,” the person said.
Options exuberance
The Securities and Exchange Board of India (Sebi), which had issued multiple measures in October to calm the exuberance in options, followed up with additional steps in May this year.
The plan for fresh measures comes against the backdrop of Sebi’s interim order against Jane Street for alleged manipulation in index options on expiry day. The regulator has ordered the seizure of ₹4,844 crore of allegedly unlawful gains by the US proprietary trader, which is expected to respond to the regulatory order soon. Meanwhile, shares of companies operating in the capital market have taken a severe beating, as investors fear that a potential tightening in derivatives after the Jane Street fiasco will hurt volumes.
On Tuesday, shares of BSE tanked 6% to close at ₹2477, and now down18% from a record ₹3030 a month ago. Angel One, India’s third-largest listed retail broker, fell 3.6% at ₹2692.6 and 360 One closed down 2.6% at ₹1220.4, despite the benchmark Nifty gaining one fourth of a percent to 25522.5 and the Sensex rallying 0.3% to 83712.51.
‘Short-term dip’
On fears of an impact in volumes because of the Jane Street order, Dinesh Thakkar, founder & chairman and MD, Angel One, said, “There might be a brief, short-term dip in volumes — perhaps for a week or so — but activity is likely to rebound quickly. We must remember that it’s retail investors who drive opportunity in our markets, not high-frequency traders, who typically capitalize on inefficiencies created by increased retail participation in options trading. “
According to Thakkar, any exit is likely to be short-lived, as others will step in to fill the gap. The younger generation is looking to compound wealth faster, and once they enter the market, they tend to stay, he said.
Currently, the weekly options contracts on the BSE and NSE expire on Tuesdays and Thursdays respectively. Both Sensex and Nifty options contracts are widely popular – For instance, in the week ended 27 June, the Nifty index options premium turnover on Thursday was ₹80,732 crore, compared with the average daily turnover of ₹50,419 crore for the week.
Heightened activity
A Sebi study on trading activity in the equity derivatives segment (EDS) found that while the premium turnover of index options was down 9% during December 2024 to May 2025, it was still up 14% from the same period two years ago. Moreover, while the turnover of individuals in premium terms was down 11% year on year, it was up by 36% from the same period two years ago. Also, while the number of unique individuals trading in EDS was down 20% from a year ago during December-May, it was up 24% from two years ago.
“India continues to see relatively very high level of trading in EDS, compared to other markets, particularly in index options,” the study found, adding that 91% of individual traders incurred net loss in in FY25, a trend similar to that in the preceding fiscal year.
“Clearly, given the context of the large trading in index options, the regulator wants to see if its recent measures result in a meaningful dip in volumes over the next few weeks. If there isn’t much of an impact, fresh proposals could be considered after a due consultative process,” said the person cited above.
On Tuesday, Sensex options expiry on BSE saw a premium turnover of ₹19,684 crore, the lowest since 6 May’s ₹17,152 crore, as fears of tightening spooked traders.
October moves
In October last year, Sebi cut the number of weekly expiries per exchange to just one from multiple expiries earlier, with effect from 20 November. It also increased the contract size for index derivatives to ₹15-20 lakh from ₹5-10 lakh, among other measures.
Through a follow-up circular on 29 May this year, it stipulated a change in the method of computing open interest or outstanding positions of participants in index options to a future-equivalent one from a notional one to prevent over exposure. That is, if one buys a Nifty futures contract and buys a Nifty call option, open interest was taken as 1+1 or 2. Now, the open interest of a futures is calculated as one, but the option open interest is based on a measure of how much its price changes for every point change in the underlying Nifty. If it has a 0.5 measure, the open interest of futures will be 1 and that of option will be 0.5, resulting in a total of 1.5 instead of 2.
Also, there will be intra-day monitoring of exposure taken by participants. Intraday net limit for futures and options is ₹1500 crore each with a gross limit of ₹10,000 crore for all long and short options positions. Earlier, the net limit was ₹500 crore, and there was no gross limit.
Key Takeaways
- Sebi eyes new measures if options trading remains hot
Fortnightly expiry considered; one expiry per fortnight possible
Recent Sebi measures on position limits are now in effect
Regulator watching if recent measures have been effective
Sebi has seized ₹4,844 crore from Jane Street for manipulation
