In a move that has shaken the foundation of India’s trading ecosystem, the Securities and Exchange Board of India (SEBI) is reportedly considering a major overhaul of the equity derivatives market. The primary objective is to reduce the high-risk behavior of retail traders in Futures & Options (F&O) by extending the expiry period of derivative contracts. This proposal has sent capital-market-related stocks like BSE, Angel One, and CDSL into a tailspin, with intraday losses of up to 6% recorded on the day of the announcement.
The concern stems from the fact that a large share of brokerage and exchange revenue is derived from F&O turnover, particularly weekly options contracts. Shortening the number of expiry events per month or elongating contract durations could drastically reduce trading volumes, cutting into profits of platforms like BSE and intermediaries like Angel One. CDSL, being a major depository that facilitates settlements, also took a hit amid fears of lower retail engagement.
SEBI’s intention is rooted in data: nearly 90% of retail traders in the F&O segment lose money, often lured by short-term trades and high leverage. By extending expiries, SEBI aims to discourage impulsive speculation and refocus markets on more sustainable trading practices. While the move aligns with long-term investor protection, the short-term reaction has been anything but calm.
Brokerages have started issuing advisories and downgrading their near-term outlooks on stocks highly exposed to F&O activity. Meanwhile, industry veterans are calling for a consultative approach rather than abrupt regulatory shifts, warning that sudden changes could drive activity into unregulated or offshore markets.
