NewsStocksIndia Options Traders Await Regulatory Clarity on Potential Weekly Contract RestrictionsIndia Options Traders Await Regulatory Clarity on Potential Weekly Contract Restrictions
SEBI's derivatives regulations successfully reduced options trading speculation but left uncertainty about further weekly contract restrictions. The measures cut NSE derivatives turnover by 20% to ₹515 trillion in 2025, eliminating most weekly options except Nifty 50 and Sensex contracts. Market participants remain divided on potential additional curbs, with some emphasizing hedging needs while others support continued normalization of the overheated derivatives market.
*this image is generated using AI for illustrative purposes only.
India's derivatives market faces continued uncertainty as traders await clarity on potential additional restrictions to weekly options contracts, following successful regulatory measures that curbed excessive retail speculation. The Securities and Exchange Board of India (SEBI) has not provided updates since August regarding potential elimination of the remaining weekly contracts on benchmark indices.
Current Regulatory Landscape
SEBI's comprehensive clampdown has already transformed the derivatives market through several key measures. The regulator eliminated most weekly options contracts in November 2024, allowing exchanges to maintain only one weekly contract each. The National Stock Exchange selected the Nifty 50 Index, while BSE chose the Sensex Index as their respective underlying securities.
| Regulatory Changes: | Impact |
|---|---|
| Weekly Contracts Remaining: | Only Nifty 50 and Sensex |
| Previous Popular Contract: | Nifty Bank Index (eliminated) |
| Additional Measures: | Higher margins, tighter position limits |
| Implementation Date: | November 2024 |
The regulatory framework also included higher margin requirements and stricter position limits, creating a more controlled trading environment. These measures addressed concerns about retail investors losing billions of dollars on derivatives trading.
Market Impact and Volume Changes
The regulatory intervention has produced measurable results in trading activity. Derivatives turnover on the National Stock Exchange declined significantly, reflecting the effectiveness of the implemented measures.
| Trading Volume Metrics: | 2024 | 2025 | Change |
|---|---|---|---|
| NSE Derivatives Turnover: | ₹643.75 trillion | ₹515.00 trillion | -20% |
| Volume Trend: | Growth | First decline since 2017 | Significant shift |
Weekly options contracts had become central to India's derivatives boom, with the Nifty Bank Index weeklies previously accounting for more than half of all index options turnover. In December, index options volume on weekly expiries more than tripled compared to other trading days, demonstrating their popularity among market participants.
Industry Perspectives on Market Evolution
Market participants express mixed views on the regulatory changes and their long-term implications. Some emphasize the continued importance of weekly contracts for hedging strategies, while others support the normalization process.
Concerns about further restrictions include:
- Potential drastic reduction in trading volumes
- Limited short-term hedging instruments for foreign and local traders
- Impact on market liquidity and participant engagement
Positive aspects of regulation:
- Healthier mix of market participants
- Reduced retail speculation risks
- More sustainable market structure
Despite volume declines, average daily notional turnover has shown signs of recovery from early 2025 lows. Listed exchanges have reported better-than-estimated quarterly earnings with increased market share for equity options, suggesting underlying market resilience.
Global Context and Future Outlook
The Indian regulatory approach contrasts with global trends toward shorter-dated options contracts. International markets have embraced brief-duration instruments, with zero-days-to-expiry options gaining significant popularity in major financial centers.
Market experts anticipate continued growth in India's options market through institutional participation and expanded stock options offerings. The focus has shifted toward sustainable development rather than volume-driven expansion, potentially creating a more stable foundation for long-term market evolution.
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