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

In April 2024, NSE saw a total of nearly 8,494 million contracts being traded with options contracts accounting for bulk of the share. BSE, on the other hand, saw 2,224 million contracts being traded in April.

The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (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.

“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 RBI Governor Shaktikanta 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.”

He further highlighted the fact that SEBI is actively addressing the issue and will take appropriate actions if needed. The discussions took place within the framework of the Financial Stability and Development Council (FSDC), he said.

India's nominal GDP or GDP at Current Prices was estimated to be Rs 295.36 lakh crore in the year 2023-24, according to the Ministry of Statistics and Programme Implementation website.

The combined average F&O turnover for BSE and NSE stood at Rs 362 trillion in FY24.

Incidentally, the RBI Governor's comments come when the derivatives volume on the Indian stock exchanges is on a steady rise and the Indian bourses account for more than 80 percent of the global equity derivatives volume.

Data from Futures Industry Association (FIA), a global trade organisation for the derivatives market, shows that India’s National Stock Exchange (NSE) occupies the numero uno position in terms of the number of options contracts traded only to be followed by another Indian bourse – BSE.

In April 2024, NSE saw a total of nearly 8,494 million contracts being traded with options contracts accounting for the bulk of the share. BSE, on the other hand, saw 2,224 million contracts being traded in April.

Incidentally, the combined volume of the two Indian bourses accounted for almost 81% of the global volume, which was pegged at 13,255 million contracts.

Meanwhile, a recent SEBI discussion paper suggested that the regulator has proposed stricter eligibility criteria for stocks in the futures and options segment, aiming to update a framework unchanged since 2016.
SEBI's discussion paper has further proposed new criteria for selecting stocks in futures and options trading, aiming to ensure sufficient liquidity and market interest.

The SEBI discussion paper proposed that stocks must have traded on 75 percent of trading days, with at least 15 percent participation from active derivatives traders. Additional requirements included daily turnover thresholds and limits on open contracts to mitigate risks like market manipulation and volatility.

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