Context:
The Bombay Stock Exchange (BSE) has sought approval from the Securities and Exchange Board of India (Sebi) to offer monthly derivative contracts for two to three additional indices, including several thematic indices.
- Market Share Ambitions: This move is aimed at expanding the BSE’s share in the Futures and Options (F&O) segment, a key growth area for the exchange.
Regulatory Process and Timeline
- Approval Challenges: While the proposal is in the works, it may take time for Sebi to grant approval. This delay is partly due to ongoing regulatory changes and proposals surrounding F&O, including adjustments in delta calculation and the potential limitation of expiry days to two.
- Sebi’s Criteria for Approval: To qualify for monthly derivative contracts, an index must meet several conditions set by Sebi, such as ensuring that the stocks contributing to 80% of the index’s weight are eligible for derivative trading. Additionally, any stock ineligible for F&O must not have a weighting of more than 5% in the index.
Recent Developments and Index Launches
- New Indices Launched: Since September 2024, BSE has introduced 20 new indices based on market capitalisation, sector classification, and other criteria. These include BSE 1000, BSE Focused Midcap, BSE 250 Microcap, BSE PSU Bank, and BSE Focused IT.
- Use of Indices: These indices can be used for various financial products like mutual funds, portfolio management services (PMS), exchange-traded funds (ETFs), and index funds.
Current Market Offerings and Performance
- Existing Monthly Contracts: Currently, the BSE offers monthly derivative contracts for three indices: Sensex, Bankex, and Sensex50.
- Market Share Growth: BSE’s market share in index options has increased from 16.4% in December 2024 to around 22.1% in February 2025, boosted by regulatory changes that have helped increase premium turnover.
Future Prospects
- Potential for Further Expansions: The BSE plans to continue engaging with market participants and regulators to develop new products and services that meet the evolving market demand.
- Ongoing Consultation: The BSE spokesperson emphasized that the process of regulatory engagement is continuous, involving adjustments to align with the dynamic nature of the capital market.
