In a significant shift in the Indian stock exchange landscape, the National Stock Exchange (NSE) has taken aggressive steps to reclaim market share from BSE , according to a recent report by Goldman Sachs. This development has led to a revision in BSE's share price target and market expectations.

Key Strategic Moves by NSE

The NSE has implemented two crucial changes to strengthen its position:

1. F&O Expiry Day Change: NSE switched its Futures and Options (F&O) expiry days to Tuesdays. This move has already shown results, with NSE gaining two percentage points of market share in index options in September.

2. Reduction in Lot Size: NSE announced a decrease in lot size from 75 to 65 contracts, effective January 2026 for weekly contracts. This 13% reduction brings NSE's Nifty 50 contract sizes closer to BSE's Sensex, narrowing BSE's advantage of lower traded premium per contract.

Impact on BSE

Goldman Sachs has revised its outlook for BSE in light of these developments:

Despite these challenges, Goldman Sachs maintains an optimistic long-term view for BSE:

The investment firm expects BSE to continue adding clients, supporting its market share growth projections.

SEBI Review of Weekly Options Expiry

The Securities and Exchange Board of India (SEBI) has received numerous representations from brokers seeking continuation of weekly options expiry. Both BSE and NSE are likely to seek continuation of this practice. SEBI is currently collecting and assessing derivatives data, with no formal consultation process initiated yet. The regulator plans to thoroughly assess feedback without rushing to issue new rules or consultation papers.

It's worth noting that SEBI's whole-time member Ananth Narayan, who oversees derivatives, is set to retire on October 9. Previously, SEBI Chairman Tuhin Kanta Pandey had indicated plans to increase equity derivatives tenure and issue a consultation paper.

Market Response

Following reports of broker representations to SEBI, shares of BSE Ltd. and Angel One Ltd. recovered from their daily lows on Tuesday. BSE shares traded 1.60% higher at 2253.50, while Angel One shares recovered to trade 0.70% lower at 2281.40.

Outlook

While NSE's aggressive strategies have put pressure on BSE's immediate prospects, the overall outlook for BSE remains positive. The projected market share growth from 27.00% to 40.00% over the next 18 months suggests that BSE is expected to maintain its competitive edge and continue expanding its client base.

As the competition between NSE and BSE intensifies, market participants will likely benefit from improved services and potentially lower costs. However, the long-term impact of these changes on the broader Indian stock market ecosystem remains to be seen.

Investors and market watchers should keep a close eye on how these dynamics unfold, as they could significantly influence trading patterns and market liquidity in the coming years. Additionally, the outcome of SEBI's review of weekly options expiry could have further implications for market structure and trading strategies.

BSE Ltd. , India's 150-year-old stock exchange, has made substantial strides in capturing market share for index options contracts, particularly on expiration days. This shift comes in the wake of regulatory changes implemented by the Securities and Exchange Board of India (SEBI).

Market Share Surge on Expiry Days

BSE has seen a remarkable increase in its market share of options premium turnover on expiry days. Since mid-July, the exchange has been consistently capturing 50% or more of the options premium turnover on most expiry days, a significant jump from its 35% share in April.

Strategic Expiration Day Change

A key factor contributing to BSE's growth was its decision to switch its derivatives expiration day from Tuesday to Thursday. This move was made in response to the National Stock Exchange (NSE) shifting its expiration day to Tuesdays. The strategic change has allowed BSE to capitalize on the new market dynamics.

NSE's Market Position

Despite BSE's gains, the National Stock Exchange continues to dominate the overall volume in India's derivatives market:

• NSE holds nearly 80% of total derivatives contracts
• However, NSE has experienced a substantial decline in its monthly options premium turnover, dropping more than 40% through August compared to October

Regulatory Impact on Options Market

SEBI's regulatory crackdown on India's options market has played a significant role in reshaping the landscape:

• Elimination of weekly NSE Nifty Bank Index options
• Increase in minimum limits to reduce retail investor speculation

Trader Preferences Shifting

Analysts anticipate BSE to continue gaining market share in the options segment. Traders are increasingly viewing Sensex options as preferred contracts for macro events, indicating a shift in market sentiment.

BSE Share Price Performance

Despite the positive developments in market share, BSE's stock has faced some headwinds:

• BSE's share price has declined 32.00% from its June record high
• The drop is attributed to concerns about the impact of regulatory changes on the exchange's business

The evolving dynamics in India's options market, driven by regulatory changes and strategic moves by exchanges, continue to reshape the competitive landscape. BSE's recent gains in market share highlight the potential for significant shifts in trader preferences and market structure in response to regulatory and competitive pressures.