SEBI Weighs Longer Derivative Tenures; Angel One and BSE Shares Slide

The Securities and Exchange Board of India (SEBI) is considering extending the tenure of equity derivatives, a move that sparked sharp declines in the shares of key market players, including BSE and Angel One. The proposal was revealed by SEBI Chairman Tuhin Kanta Pandey at FICCI’s 22nd Annual Capital Markets Conference in Mumbai on August 21.

Pandey explained that the idea of lengthening the tenure of derivatives is currently in the “thought process” stage and will undergo a consultative approach before implementation. He confirmed that a consultation paper would be released, though no timeline has yet been set. “All this will be done in consultation, in what form, how, when… Yes, there will be a consultation paper. I can’t tell you when, but that is the thinking process we have,” he stated.

The regulator has been making efforts to bring balance to the futures and options (F&O) market, which has seen rapid growth in retail participation. Pandey stressed that equity derivatives play a key role in capital formation but highlighted the importance of ensuring quality and stability. “We will consult with stakeholders on ways to improve in a calibrated manner the tenor and maturity profile of derivative products, so they better serve hedging and long-term investing,” he said.

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Market Impact: Broker and Exchange Shares Decline

In recent years, SEBI has taken measures to moderate speculative activity in the F&O segment, such as limiting exchanges to only one weekly contract and standardising contract expiry days. Market participants are concerned that longer derivative tenures could reduce volumes for exchanges like BSE and brokerage firms reliant on F&O activity. Following Pandey’s remarks, shares of BSE and Angel One dropped by around 5%, with Angel One’s stock falling as much as 5.5% intraday to around ₹2,583.9, before partially recovering.

Angel One’s Performance and Revenue Dependence on F&O

Angel One’s July business update showed growth in its F&O market share, rising to 21.2% from 20.8% in June, while its equity market share also increased to 20.1% from 19.6%. Despite these gains, the brokerage has faced stock pressure, with shares down nearly 27% from their recent 52-week high.

Angel One’s MD and CEO, Dinesh Thakkar, recently told CNBC-TV18 that 45% of the company’s revenue comes from F&O broking, and he expected margins to improve from 34% in the June quarter to nearly 40% by the March quarter. However, the latest regulatory signals appear to have raised uncertainty for brokers heavily dependent on derivatives trading.

Pandey also underlined SEBI’s broader aim of deepening India’s cash equity markets, which have doubled in daily trading volumes over the last three years. Still, he noted that more needs to be done to strengthen market quality while protecting retail investors from risky trading practices.

Conclusion

SEBI’s potential shift towards longer-tenure derivatives has opened a fresh debate in the capital markets. While the regulator insists that any change will be gradual and consultative, the immediate market reaction shows investor sensitivity to policy changes that could reshape the F&O landscape.