Capital Market Stocks Slip Up to 5.5% as SEBI Mulls Ending Weekly Derivatives Expiry

Indian capital market stocks declined sharply after reports emerged that the Securities and Exchange Board of India (SEBI) is considering restricting weekly derivatives expiry contracts. Concerns over reduced trading flexibility and potential erosion in derivative volumes led to widespread investor apprehension, resulting in notable sell‑offs among key market proxies. 

Market Reaction: F&O Stocks Under Pressure
On Tuesday, shares of BSE Ltd fell by as much and closed by 5%, reaching a low of ₹2,367.20. Angel One shares dropped and closed by over 1%, while CDSL and Motilal Oswal declined by around 0.23% and 1.74% respectively. These declines were triggered by fears of lower options activity due to proposed regulatory curbs. 

SEBI’s Derivatives Reform Proposals
Regulators are reportedly evaluating a shift from weekly to fortnightly or monthly index options expiry to curb speculative trading and prevent price distortions. SEBI had earlier mandated that equity derivatives can expire only on Tuesdays or Thursdays, limiting each exchange to a single weekly contract per benchmark index. 

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

The possible reforms may include increasing margin requirements for options trades, linking leverage to corresponding cash market holdings and adjusting Securities Transaction Tax (STT) to discourage speculative usage.

Why It Matters: Risk, Volatility and Business Models
The proposed changes follow intense regulatory scrutiny after the Jane Street case, where SEBI alleged manipulation in expiry‑day trades and impounded ₹4,840 crore in suspected profits. Regulators believe weekly expiries often fuel excessive volatility, skew retail trading behaviour, and undermine price discovery. SEBI also noted that 91% of individual F&O traders registered net losses in FY25, prompting a reassessment of contract design and expiry structures. 

This shift may reduce option trading volumes, impacting revenue streams for brokers and stock exchanges reliant on derivatives turnover and expiry-day volatility.

Conclusion

The slide in capital market stocks reflects rising investor concern over SEBI’s proposed reforms, which aim to curb speculative derivatives activity and enhance market stability. While these measures may slow short-term trading volumes, long-term benefits might include reduced volatility and stronger investor protection. Market watchers should track how exchanges and brokerage firms adapt to evolving rules, and whether SEBI proceeds with a detailed consultation paper in the coming weeks.