The National Stock Exchange witnessed a significant drop in derivatives trading activity on the latest expiry day, a development closely linked to recent regulatory action taken by the Securities and Exchange Board of India. The move targeted global high frequency trading firm Jane Street, and the ripple effects have been swift and visible across market volumes.
As per official data, the total number of index options contracts traded fell by over 21 percent to 247 million. This marks the lowest level seen since April 30 and reflects a noticeable reduction in market engagement. The overall contracts traded across futures and options, including both index and individual stock derivatives, also declined by 21 percent to 252 million. This contraction in activity has raised fresh questions about liquidity in the derivatives segment and the ability of retail participants to sustain momentum in the absence of large institutional players.
The notional turnover for index options on expiry day saw a steep fall as well. From an average of 564 lakh crore rupees in June, turnover dropped to 472 lakh crore rupees. Premium turnover was also hit hard, sliding by 25 percent to just over 45,000 crore rupees compared to the previous expiry. These are not just statistical adjustments. They reflect a sudden cooling off in what has traditionally been one of the busiest corners of the Indian financial markets.
Market experts attribute this decline to a cautious stance being adopted by several institutional players like Jane Street. After SEBI’s intervention, many such entities have significantly reduced their turnover, stepping back from active participation in expiry day strategies. With regulatory oversight intensifying, these firms are now reassessing their operational models in India. According to market analysts, the lack of deep pocketed players has left retail investors carrying the weight, though they often lack the tools and experience needed to operate confidently in such high stakes environments.
On expiry days, especially during the closing hours, liquidity provided by large institutional traders often helps in tighter spreads and efficient price discovery. With their partial exit, the market could begin to show signs of inefficiency. That said, some experts view SEBI’s move as a necessary correction to clean up the derivatives segment. For years, concerns have been raised over disproportionate influence exerted by a few players on options and futures pricing close to expiry. The recent findings of excessive positions taken by Jane Street and its affiliated firms only confirmed these long standing fears.
A particularly alarming instance noted by the regulator occurred on May 15, which was an expiry day for weekly Nifty options. On that day, Jane Street was found to be holding substantial cash equivalent positions through index options while also actively trading in Nifty futures and constituent stock futures. That day alone saw 329 million index option contracts traded, with a notional turnover of over 612 lakh crore rupees and a premium turnover of nearly 96,000 crore rupees. These numbers stand in stark contrast to the most recent expiry, where activity dropped sharply in all categories.
This sudden drop in volumes could also affect pricing efficiency and investor confidence. While SEBI has insisted that its actions will not cause long term disruption, the short term impact on expiry day volumes is evident. Increased surveillance and tighter rules may indeed push markets toward better compliance, but they could also temporarily reduce participation until new norms are fully understood and adopted by all players.
The coming weeks, especially the monthly expiry of Nifty Bank contracts, will serve as a key indicator of how much the derivatives market has been impacted. These contracts were also found to be at the center of manipulation attempts as per SEBI’s order. Traders and investors alike will be watching to see whether the drop in volumes persists or if a new equilibrium emerges in this transformed landscape.
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