It has been three years since the launch of Sensex derivatives. Looking back, what do you see as the biggest factors behind the product’s success and acceptance among traders?
The relaunch of Sensex derivatives was driven by feedback from market participants who sought a complementary and scalable product. At launch, fewer than 10 brokers and less than 30 clients had the systems to trade the contract. However, with sharper product design, stakeholder engagement, improved technology, colocation expansion, and a clear shift in our approach, we earned strong acceptance across the market. This is reflected in the contract’s growth trajectory. Today, Sensex options are among the most actively traded contracts globally.
How much of the growth in Sensex derivatives has been driven by retail participation versus institutional investors?
The growth in Sensex derivatives has been broad-based, with strong participation from all stakeholders, including retail and institutional investors. Individual investors contribute roughly 30 per cent of total volumes in Sensex contracts. Institutional participation has steadily improved over time, resulting in better liquidity. The number of foreign portfolio investors trading these contracts currently stands at over 500, up from about 100 a year ago. We are also seeing strong participation from high-frequency traders.
What role have product design and expiry-day strategy played in gaining market share?
Our focus has been on identifying and addressing critical product gaps. Our approach included maintaining an optimal lot size suited to market participants and introducing a differentiated expiry day — starting with Friday, which was the only day available at the time, then moving to Tuesday under the Securities and Exchange Board of India’s (Sebi’s) single-expiry regime, and ultimately shifting to Thursday to accommodate market requirements. Historically, we have found that Thursday works best in terms of expiry for market participants, benefiting our overall derivatives strategy and helping diversify expiry days across exchanges.
What are the next big product launches or innovations that BSE is working on in the derivatives segment?
We have regulatory approvals for three new monthly index derivatives — BSE Focused IT, Focused MidCap, and Sensex Next 30. The BSE Focused IT index has already been launched and has received an encouraging response from market participants so far. We are also constantly scanning the market for viable products linked to emerging areas of the economy as opportunities arise.
There has been increasing regulatory scrutiny around retail participation in derivatives. How does BSE balance market growth with investor protection?
Investor protection and market development are not contradictory objectives. They must go hand in hand for markets to remain sustainable over the long term. As a market infrastructure institution, BSE’s role is not only to facilitate efficient trading but also to support responsible participation and informed investing. We believe long-term market growth can come only when investors understand products better and participate responsibly.
With weekly expiries becoming a major driver of trading activity, how sustainable is your current growth trajectory for the derivatives market?
Weekly expiries have contributed to higher participation and liquidity in the derivatives segment. However, for long-term sustainability, we are working on developing new monthly products and deepening liquidity in monthly contracts of existing products. Over the past year, we have already seen encouraging signs of improving liquidity beyond expiry day, including stronger open-interest buildup and growth in monthly contracts. As India’s capital markets remain underpenetrated relative to the size of the economy, we continue to see strong long-term potential for sustainable growth in the derivatives ecosystem.
There is market curiosity around your second term. Have discussions begun on renewal?
Matters relating to appointments and tenure are governed by Sebi rules and other regulations of relevant authorities. It would, therefore, not be appropriate for me to comment on any such discussions.
 "Sundararaman Ramamurthy, managing director and chief executive officer, BSE")