SEBI Ends Bank Nifty Weekly Options, Impacting NSE Volumes

Ashishkumar Chauhan, the managing director and CEO of the National Stock Exchange of India Ltd., stated that the overall option index volumes will significantly decline as trade volumes from the weekly Bank Nifty and other weekly options series vanish. According to Mint's study of NSE option premium data, Bank Nifty weekly options accounted for almost half of the NSE's weekly options premium turnover in the first half of 2024–25 (April–September).

Although Bank Nifty had higher volumes, the NSE will only offer the Nifty series every week starting on November 20th, in accordance with the Securities and Exchange Board of India's directive permitting only one weekly series to be offered. Sebi's actions were intended to reduce the fervour in derivatives trading due to the significant losses suffered by private investors.

In a call with analysts on Tuesday, one day after the bourse's September quarter results were announced, Chauhan stated that the weekly Bank Nifty series' discontinuation will have a significant impact. A portion of the trade may go to monthly Bank Nifty options, he continued, but "some (of the volumes) will disappear." Chauhan responded, "My understanding is that the Sebi framework is to bring down option volumes and the exchange doesn't have the flexibility to do many things," when asked if the NSE could alter the dates for its option expiry. The consent of Sebi is necessary.

Chauhan stated that there was currently no information available on the NSE's plans for a public market listing or the exchange's initial public sale of shares. Any regulated firm should get a certificate of no objection before filing the DRHP (draft red herring prospectus) as an exchange.

The NoC from Sebi has not yet been sent to us. The exchange will work on the DRHP after the NoC is given. However, we are still awaiting the Sebi NoC," Chauhan stated. Regarding the public listing of National Securities Depository Ltd., Chauhan stated that Sebi approval for its DRHP was "on its way." In order to comply with Sebi's rules on shareholding in market infrastructure institutions, NSE, which now owns 24% of NSDL's equity, would need to sell down 15% of its stake through the IPO.

Bank Nifty: Very Significant Contributor

According to Mint's research of NSE option premium data, Bank Nifty weekly options held the largest part of the ₹54.61 trillion weekly options premium turnover in the first half of FY25, at 47.5%, or ₹25.96 trillion. The Nifty held 34.4% of the total, or ₹18.81 trillion. Between April and September, 82% of the total weekly premium turnover was attributable to the two weekly series. Midcap Nifty weekly series (7%), and Finnifty weekly options (11%) supplied the remaining amount.

In the first half of FY25, the total premium turnover for Bank Nifty index options, comprising monthly and weekly options, was ₹35.17 trillion. The significance of Bank Nifty weekly options to the NSE's overall index option volumes is highlighted by the fact that the Bank Nifty weekly portion of this was 74%.

To Summarize

The discontinuation of Bank Nifty weekly options, which accounted for nearly half of NSE’s weekly options turnover, is expected to significantly reduce overall option volumes. While some trading may shift to monthly options, SEBI’s directive aims to curb derivative trading fervor, impacting NSE's revenue and highlighting the regulatory focus on investor risk mitigation.