BSE seeks Sebi approval to launch monthly contracts for several indices

Since September 2024, the exchange has launched 20 indices based on market capitalisation, weightage, and sector classification

The BSE has sought approval from market regulator Securities and Exchange Board of India (Sebi) to offer monthly derivative contracts for two-three more indices. These include a few thematic indices, said people aware of the developments.

 

The approvals would be crucial for the stock exchange to gain market share in the F&O (futures and options) segment. Sources indicate that it may take some time before the regulator gives the green light as there are several regulatory changes and proposals around F&O — including delta calculation and limiting expiry days to two days — taking shape.

 

Since September 2024, the exchange has launched 20 indices based on market capitalisation, weighting, and sector classification. These include BSE 1000, BSE Focused Midcap, BSE 250 Microcap, BSE PSU Bank, BSE 150 and BSE Focused IT. 

 

The indices can be used for mutual fund (MF) schemes, benchmarking of PMS (portfolio management services) strategies, and to run passive schemes such as exchange traded funds (ETFs) and index funds.

 

Sebi's norms limit one benchmark per exchange for weekly expiries, but allows monthly contracts for multiple indices.

 

For an index to be eligible for monthly contracts in the derivatives segment, the stocks contributing to 80 per cent of the weighting of the index should be individually eligible for derivative trading. Further, a stock that is ineligible for F&O should not have a weighting of more than 5 per cent in the index. There are several other conditions to be met before Sebi grants an approval.

 

At present, the BSE has three indices where monthly contracts are traded — Sensex, Bankex, and Sensex50.

 

“The BSE continues to engage with market participants in tandem with the regulators to develop products and services that meet growing market demand. It is an ongoing and consultative process that keeps going through changes and adjustments to address the dynamic nature of the capital market. We continue to remain committed towards responsible innovation,” said a BSE spokesperson in response to emailed queries.

 

Queries sent to Sebi on exchanges seeking to widen their product offerings in the derivatives segment did not elicit any response till the time of going to press.

 

Sources indicated that the exchange may in future apply for more approvals.

 

As per analyst reports, BSE’s index option premium market share has surged from 16.4 per cent in December 2024 to around 22.1 per cent in February 2025. An earlier series of regulatory changes by Sebi have also aided the exchange to improve its premium turnover. 

ROAD AHEAD

 

- Approvals for monthly derivative contracts sought for 2-3 indices

 

- Amid several regulatory developments in F&O, the approvals may take time

 

- Indices need to meet several eligibility conditions set by Sebi for approval

 

- BSE has launched around 20 indices since September 2024, including BSE 1000 and BSE PSU Bank 

 

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