India Derivatives Market: SEBI Curbs, Impact and New Proposals
Why in the news
India’s derivatives trading has grown to a global scale. SEBI’s curbs from November 2024 cooled activity, and a February 2025 consultation paper proposes further reforms.
Key facts
- Largest derivatives market: $6.4 trillion daily notional turnover; option premiums $2.2 trillion in 2024; highest derivatives-to-cash ratio worldwide.
- 90% of retail traders lose money, per SEBI’s study.
- November 2024 curbs: one weekly expiry per exchange, larger minimum contract size, upfront premium collection, end of calendar spread benefits on expiry days.
- Retail derivative traders rose from 700,000 to 3.7 million in five years.
Impact of the curbs
| Indicator | Change |
|---|---|
| Monthly expiries | 20 to 8 |
| Average premium per index option | ₹1,300 (Nov 2024) to ₹3,000 (Feb 2025) |
| Zero-day options, share of volume | 70% to 50% |
| Zero-day options, share of premiums | 40% to 20% |
| Notional daily options value | Down 35% ($5 trillion to $3.2 trillion) |
| Option premium turnover | Down 15% |
| Cash market volumes | Down 12% |
In March 2025 derivative volumes bounced back 20% month on month. The notional derivatives-to-cash ratio is still 300x (400x in November).
SEBI consultation paper (February 2025)
- Delta-based (future-equivalent) market-wide position limits.
- Single-stock derivative limits tied to cash delivery volumes.
- Tighter entity-wise limits with intraday monitoring: ₹500 crore end-of-day and ₹1,500 crore gross.
- New 15% free-float limit, more liberal than the earlier 20% notional cap; stocks under a derivatives ban could fall from 366 to 27.
- Diversified benchmarks to reduce index manipulation.
Exam angle
- Regulator: SEBI; curbs effective November 2024.