F&O volumes fall as Jane Street crackdown affects derivatives market

On Monday, futures and options (F&O) turnover on the NSE was Rs 91.4 trillion, a 26 per cent drop from the average of the previous 12 Mondays

The ban on US-based proprietary trading firm Jane Street is impacting derivatives trading volumes in India. On Monday, futures and options (F&O) turnover on the National Stock Exchange (NSE) was ₹91.4 trillion, a 26 per cent drop from the average of the previous 12 Mondays.  Similarly, Friday’s turnover, when the Securities and Exchange Board of India’s (Sebi’s) ban took effect, fell 9 per cent compared to the prior 12 Fridays. F&O volumes typically peak on Tuesdays and Thursdays due to Sensex and Nifty weekly contract expiries.  Experts caution it’s too early to assess the full market impact, but a few weekly expiries will provide clearer insights. Proprietary trading firms like Jane Street account for 60 per cent of derivatives turnover, with a strong presence in options, holding nearly 50 per cent market share. Jane Street was a key volume driver among prop firms.   

  Broking industry officials suggest heightened regulatory scrutiny by Sebi to curb market manipulation may further dampen prop trading activity in the near term. However, they believe this could foster a healthier market in the long run by boosting retail participation and improving profit potential for small investors.  From a peak of ₹537 trillion in September, the average daily F&O turnover in the equities segment fell 35 per cent to ₹346 trillion in June, driven by Sebi’s tightened regulations to curb manipulation and excessive speculation.