BSE to keep weekly options tied to Sensex despite new derivative rules

India's BSE will retain weekly derivative contracts linked to the Sensex after the country's markets regulator announced tighter rules for equity derivatives, two sources with direct knowledge of the matter said.
 

The Securities and Exchange Board of India on Tuesday asked exchanges to cut down the number of weekly options contracts available to investors to only one from Nov. 20.
 

The new rules followed a spurt in retail investors trading options, which the regulator and the government viewed as a risk to household finances.
 

A Sebi study showed that individual traders made net losses totalling Rs 1.81 trillion ($21.57 billion) in futures and options in the three years to March 2024, with only 7.2 per cent making a profit.
 

 

BSE currently runs two contracts linked to indices - BSE Sensex and BSE Bankex.
 

"BSE Sensex has much larger volumes as compared to Bankex."
 

It makes sense to retain weekly expiry on the more active contract," said one of the sources, declining to be identified as they were not authorised to speak to the media.
 

The exchange operator did not immediately reply to a Reuters email for comments.
 

The notional turnover for BSE's index options in August stood at Rs 2,603 trillion.
 

As per exchange data, Sensex contributed to 85 per cent of the volumes in the financial year ended March 2024.
 

Jefferies said on Thursday it cut its earnings per share estimate for BSE by 10 per cent 'assuming discontinuance of Bankex product and focus will remain on volume impact on continuing product (Sensex) post implementation of new regulations'.
 

Shares of BSE, which fell as much as 3 per cent in early trade, turned positive and were last up 8.3 per cent as Sebi's final rules reduced expiry-day margins to 2 per cent compared to 8 per cent proposed earlier.
 

IIFL Securities in a note said it expects a 20 per cent hit on BSE volumes as compared to a 30 per cent-35 per cent impact on NSE.
 

NSE, the country's largest exchange, has four weekly expiries linked to the Nifty, Bank Nifty, Fin Nifty and Nifty Mid-cap. The notional turnover for index options for NSE in August was Rs 7,768 trillion.
 

"Nifty and Bank Nifty are equally popular among traders. The exchange is canvassing feedback from traders before it decides on which weekly expiry to retain," said a third person familiar with NSE's thinking.
 

An email query sent to NSE spokesperson was not answered immediately.
 

According to IIFL Securities, NSE's biggest contract is Bank Nifty, contributing 50 per cent of option premium volumes.
 

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