The exchange is adding four new stocks to Bankex—Canara Bank, AU Small Finance Bank, PNB and Union Bank—effective December 26, expanding the index to 14 components with a revised weighting structure that covers the top three stocks at 45%. It’s a bold play to make monthly derivatives more attractive to traders accustomed to the adrenaline rush of weekly expirations.
“We are making it a stronger index,” BSE MD and CEO Sundararaman Ramamurthy told ET Markets. “We want to make monthly derivatives a bigger product for Bankex by asking people to try monthly products.”
BSE’s strategy extends beyond just Bankex. The exchange has two to three more applications in the pipeline for monthly derivatives, some of which Ramamurthy described as “economically meaningful for the market”.
BSE rides a wave of momentum from its flagship Sensex derivatives, which have captured a staggering 45% market share in terms of contracts, almost matching NSE’s Nifty. According to local brokerage firm Motilal Oswal, BSE’s notional turnover market share in F&O segment was 43.5% in November and premium market share was 25.9%.
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The overarching game plan is clear: deepen merchant engagement beyond the frenzy of weekly closings.
Economics favors menstrual pressure. “If you take the weekly premium and multiply it by four, it will always be higher than the monthly premium,” explained Ramamoorthy. “So monthly options are always cheaper.”
“BSE is well positioned to maintain steady growth and market share gains in the index options space,” said Swarnabha Mukherjee of B&K Securities, adding that BSE’s market share was driven by Sensex and Bankex contracts, strategic switching on expiry days of expiry products and new product launches by Sensex.
“Furthermore, we expect more client/member onboarding and scale-up in the colocation business to support derivatives volume growth and premium quality,” Mukherjee added.
“BSE’s main strategic objective is to deepen and widen the market by promoting long-term contracts and trading on non-expiration days. This approach aims to improve premiums and increase overall profitability,” he said, adding that higher premium per contract reduces the impact of direct costs such as clearing and regulatory fees, as fees are not fixed based on clear numbers. Turnover
B&K Securities expects premium quality to gradually improve in FY26-28 in BSE’s index options segment, largely driven by volume development on non-expiry days – exactly where management is focusing its efforts.
The success story of the Sensex since its relaunch in May 2023 provides a pattern. From just 50 gross transactions and 28 brokers on day one, the product now has 550 brokers and 435 foreign portfolio investors. “The market wanted it,” Ramamurthy said, citing the Sensex’s 99.9% correlation with the Nifty as key. “I asked brokers and they said you can’t have one product and not trade more. You have to have a different product, but it’s highly correlated.”
His tracking metrics go beyond market share: “The more important parameters are how many brokers, FIIs and clients are trading with me. Whether my second, third or fourth week is all becoming more popular.”
On the regulatory front, Ramamurthy struck a philosophical tone about options trading safety. “The safety of the product is not in the regulatory standards. It’s how the person uses it,” he said. “You have a car, you drive recklessly. Is it a safe thing to do? Are there enough laws to put speed limits? Can you say now that speed limits are put everywhere, it’s safer to drive a car?”
He advocated limiting leverage products to institutions: “We should start at some point, we should rethink what kind of products should be allowed in derivatives only for institutions. Individuals should not enter into leverage products because they may or may not understand.”
BSE is also ramping up its GIFT City operations with a new CEO and revamped management team, strengthening technology infrastructure to expand offshore hubs. “We’re working on some of them,” Ramamurthy said of Gift City’s new products. “He will do whatever it takes to make Gift City a success according to the Prime Minister’s expectations.”
With revamped Bankex set to launch by month-end and a pipeline of monthly products in the works, the BSE is betting that the next phase of India’s derivatives boom will be won not on the weekly expiration battlefield, but in the stable territory of long-term contracts.
(disclaimer: Recommendations, suggestions, opinions and views given by experts are their own. (These do not represent the views of The Economic Times)
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