SEBI’s Ananth Narayan and NSE CEO Ashish Chauhan recently addressed concerns regarding the derivatives market. Narayan emphasized the necessity of curbing options activity, particularly on expiry days, to prevent overtrading. Speaking at the Moneycontrol Global Wealth Summit 2025 in Mumbai, Narayan highlighted the importance of risk management in capital creation.

Chauhan, on the other hand, pointed out that India’s derivative contract sizes are relatively small compared to global standards, being only one-fifth or one-tenth of those in Europe and other countries. This disparity in contract sizes raises questions about the speculative nature of trading activities on expiry days, prompting regulatory actions to reduce index option volumes. SEBI introduced measures in October 2024 to address excessive trading in derivatives, including increasing the minimum contract size and upfront premium collection from clients.

Narayan commended SEBI’s efforts in reducing index option volumes without adversely affecting the broader derivatives market. He stressed the need for stronger cash segment activity before delving into derivatives trading. Chauhan echoed this sentiment, highlighting that while Indian exchanges may have a high number of contracts, their value is significantly lower compared to global peers.

Looking ahead, Narayan indicated that future regulatory decisions by SEBI would be data-driven. He cited statistics showing a disproportionately high size of India’s derivatives market relative to its market capitalization, with a significant percentage of traders incurring losses. The focus on reducing volumes on expiry days aims to channel national resources more effectively.

In conclusion, the dialogue between SEBI’s Narayan and NSE’s Chauhan underscores the ongoing efforts to regulate and optimize India’s derivatives market. As the regulatory landscape evolves, the emphasis remains on balancing trading activities to ensure market stability and investor protection.