The Securities and Exchange Board of India (Sebi) has proposed a series of seven measures aimed at curbing retail speculation in the futures and options (F&O) market, which could have significant repercussions for India’s major stock exchanges, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). If these measures are enacted, market volumes are projected to drop by 30-40%, according to IIFL Securities.
The proposed regulations are expected to lead to a substantial decrease in investor participation, with a notable impact on earnings for both NSE and BSE. IIFL Securities anticipates that the earnings of NSE and BSE could decline by 15-30% as a result of reduced trading activity.
Discount brokers, who rely heavily on retail investors and have a significant stake in the F&O market, are projected to face the most severe impact. The tightening of regulations could lead to a considerable reduction in their revenue, as these brokers are particularly vulnerable due to their business models heavily focused on retail trading.
In contrast, traditional full-service brokers might experience a more moderate impact due to their diversified revenue streams and less dependence on F&O trading.
IIFL Securities noted that the expected earnings drop for the NSE could be more pronounced given that options account for approximately 60% of its anticipated revenue for FY25. The BSE, with options contributing around 40% to its revenue, will also face notable losses but to a lesser extent compared to its larger counterpart.
Overall, while the regulatory changes are aimed at mitigating speculative trading, they will likely result in decreased market volumes and altered revenue dynamics for the exchanges and brokerage firms. The full impact will depend on the final implementation details of Sebi’s proposals and the industry’s ability to adapt to the new regulatory environment.
I am Aparna Sahu
Investment Specialist and Financial Writer
With 2 years of experience in the financial sector, Aparna brings a wealth of knowledge and insight to Investor Welcome. As an accomplished author and investment specialist, Aparna has a passion for demystifying complex financial concepts and empowering investors with actionable strategies. She has been featured in relevant publications, if any, and is dedicated to providing clear, evidence-based analysis that helps clients make informed investment decisions. Aparna holds a relevant degree or certification and is committed to staying ahead of market trends to deliver the most up-to-date advice.
