Index Derivatives Trading Stabilises Amid Regulatory Tumult

After a turbulent stretch spurred by regulatory changes, trading activity in index derivatives and options appears to be stabilising, according to a report from rating agency ICRA. This development comes as market players strategically adjust their trading methods following a three-month decline in options volumes.

Introduced in November 2024, new regulatory measures had initially prompted a significant contraction in trading activity. From December 2024 to March 2025, the average daily premium turnover shrank by 18 percent, and options contracts traded saw a substantial 60 percent drop. Order volumes fell by 25-35 percent, affecting the F&O brokerage sector. Nevertheless, ICRA's report indicates that trading remains above historical norms, showcasing market resilience.

The report also notes that margin trading facility exposures, having peaked in December 2024, have reduced to approximately Rs. 71,000 crore. This aligns with broader market trends and suggests potential for resurgence as investor confidence grows. While securities broking firms have faced revenue drops, the launch of the MSEI-SX40 weekly index options could bolster future trading volumes, though the industry remains cautious of potential regulatory changes.

(With inputs from agencies.)