“Unlike longer term derivatives, short-term derivative products such as expiry day trading in index options may detract from capital formation,” Sebi whole-time member Ananth Narayan at a CII event in Kolkata. “Even today, very short-term derivatives dominate our equity derivative volumes.
Research has suggested that expiry day option trading increases market volatility and could lead to noise trading that may potentially undermine confidence in price formation,” he said.
A Sebi research shows that 91% of individual traders incurred net losses trading in F&O in FY25, with their aggregate losses crossing ₹1 lakh crore.
“As many experts have pointed out, our Indian derivative market ecosystem is quite unique, in that on expiry days, comparable turnover in index options are often 350 times or more the turnover in the underlying cash market-an imbalance that is obviously unhealthy, with several potential adverse consequences,” Narayan said. He added that, the regulator recognises the potential concerns of market infrastructure institutions, brokers, and other intermediaries, whose revenues may depend heavily on these short-term derivative volumes.
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