Amid regulatory concerns, India corners 81% of global F&O volume

The National Stock Exchange (NSE) and BSE are the world’s top two bourses in terms of F&O volume and the turnover has reached such levels that the combined turnover of the two Indian stock exchanges accounted for more than 80% of the global turnover in the month of April

Regulators may well be concerned about the growing volume of the equity derivatives segment but for the Indian stock exchanges, the futures & options (F&O) arena is a big focus area from a business point of view.

The National Stock Exchange (NSE) and BSE are the world’s top two bourses in terms of F&O volume and the turnover has reached such levels that the combined turnover of the two Indian stock exchanges accounted for more than 80% of the global turnover in the month of April.

Data from the Futures Industry Association shows that a total of 8,484 million contracts were traded on NSE in April, which was the highest among all global bourses. NSE was followed by BSE that saw a little over 2,224 million contracts changing hands in April.

Further, if the year-on-year growth is taken into account, then NSE registered a 92 percent rise. BSE’s rise is not exactly comparable as the bourse saw an uptick in its F&O trading turnover only from May last year – prior to that it was hovering around near-zero levels.

More importantly, the combined volume of BSE and NSE was nearly 81 percent of the global equity derivatives turnover in the month of April.

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The wide lead that the Indian bourses enjoy on the global arena can be gauged from the fact that the exchange that occupies the third position – Brazil’s B3 – saw a little over 692 million contracts being traded in April.

Given the quantum of volumes, it is obvious that the equity derivatives segment is an important vertical from an income point of view as well.

For BSE, the revenues coming from the F&O segment has been in excess of Rs 30 crore in each of the months, starting December 2023. In February this year, the monthly revenue from the equity derivatives segment touched Rs 43.04 crore.

While the similar numbers are not available for NSE, the bourse earned a whopping Rs 12,049 crore by way of transaction charges – the single-biggest source of revenue -- in FY24.

In terms of the growth in turnover, the average daily turnover for BSE has grown from nearly 3.5 million contracts in FY24 to 9.12 million contracts in FY25. Similarly, NSE saw the monthly average number of contracts jump from 7,933 million contracts in FY24 to 8,653 million contracts in FY25.

While the financials of both BSE and NSE along with the turnover data of the two bourses clearly show that the equity derivatives segment is an important business vertical and the exchanges would obviously want the segment to clock higher volumes with each passing month and year, the picture changes significantly when the F&O arena is seen from an investor or regulatory point of view.

In January 2023, capital markets regulator Securities and Exchange Board of India (SEBI) released a study that showed that nine out of 10 individual traders in the equity derivatives segment incurred net losses in FY19 and FY22 even as the number of such traders jumped 500% between the two fiscals.

It further stated that, on an average, those who made losses, lost nearly Rs. 50,000 in FY21 while the average absolute net loss of a loss maker was over 15 times the net profit made those who made profits.

“89% of the individual traders (nine out of 10 individual traders) in the equity F&O segment incurred losses with an average loss of Rs 1.11 lakh during FY22 whereas 90% of the active traders incurred average losses of Rs 1.25 lakh during the same period,” stated the Sebi study.

More recently, Reserve Bank of India Governor Shaktikanta Das said that both the central bank and SEBI are keeping a close watch on the surging volume in the equity derivatives segment whose volumes have even dwarfed the nominal GDP of the country.

Also Read: RBI, SEBI closely monitoring high F&O trading volumes; India account for nearly 81% of global turnover

“Options and futures volumes are larger than the nominal GDP of the country. We have discussed this matter with SEBI, and they will address it,” said Das at an event hosted by ET Now on Tuesday.

Das, however, added that “all parameters and indicators of the Indian economy and financial sector appear stable at the moment.”