SEBI’s Ananth Narayan expresses concern about high volumes in short-term derivatives
SEBI’s Ananth Narayan expresses concern about high volumes in short-term derivatives
The regulator explores ways to improve the futures and options market
The Securities and Exchange Board of India (SEBI) has expressed concern about high volumes in short-term derivatives.
At the Confederation of Indian Industry (CII) event held in Kolkata, SEBI’s whole-time member Ananth Narayan stated, "Unlike longer-term derivatives, short-term derivative products such as expiry day trading in index options may detract from capital formation. The very short-term derivatives dominate our equity volumes.”
The official added that new steps could be introduced in the future and options (F&O) market, as research revealed that most individual traders lost money in F&O trading. The expiry day option trading increases market volatility and could lead to noise trading and undermine confidence in price formation.
SEBI research revealed that 91 percent of individual traders incurred net losses trading in F&O in FY 2025, with their aggregate losses crossing Rs.1 lakh crore.
Narayan explained, "As many experts have pointed out, our Indian derivative market ecosystem is quite unique. On expiry days, comparable turnover in index options are often 350 times or more the turnover in the underlying cash market. this is an imbalance that is obviously unhealthy, with potential adverse consequences.”
He added that the regulator recognized the concerns of market infrastructure institutions, brokers and intermediaries, whose revenues may depend on these short-term derivative volumes.
