SEBI board member Ananth Narayan says short-term derivatives dominate trading volumes in India, with activity heavily concentrated on expiry days.
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FRANCIS MASCARENHAS

India’s securities regulator is exploring ways to extend the tenor of equity derivatives products to wean retail investors off speculative short-term contracts.

The Securities and Exchange Board of India also aims to boost cash equities trading, board member Ananth Narayan said at an industry event Thursday, though he didn’t specify how SEBI plans to achieve this. Short-term derivatives dominate trading volumes in India, with activity heavily concentrated on expiry days, he added.

Narayan’s comments gain significance in the context of India’s lopsided market structure, where derivatives trading turnover is more than 300 times larger than cash equities —  a skew highlighted by the recent regulatory crackdown against Jane Street Group. SEBI alleged that the US firm exploited the thin liquidity in cash and futures segments to move the market in its favor. Jane Street has denied the allegations.

“Our Indian derivative market ecosystem is quite unique, in that on expiry days, comparable turnover in index options are often 350 times or more than the turnover in the underlying cash market, said Narayan, who signed the 105-page order against Jane Street. “The imbalance is obviously unhealthy.”

According to a SEBI study, more than 90 per cent of individual investors trading derivatives in India lost money, with cumulative losses exceeding $12 billion in the year ended March. 

Over the four years through March, mom-and-pop traders lost a combined $33 billion, despite repeated warnings about the high risks of competing against better-funded and more experienced market players.

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Published on July 17, 2025