BSE ups its game in F&O segment

BSE ups its game in F&O segment

Traders and brokers are preparing for a new weekly event in the equity derivatives segment, which could lead to higher volumes as well as higher volatility.

The BSE, which languishes in the F&O segment compared to its larger rival — the National Stock Exchange — has made important tweaks to its derivatives products to step up its game and increase volumes.

Data show that in FY23, the BSE recorded a total of 373 million contracts in the F&O segment. Overall turnover for the bourse in the segment stood at Rs 343.5 trillion, with an average daily turnover of Rs 1.38 trillion. In contrast, the average daily turnover for the NSE stood at a whopping Rs 153.5 trillion.

This shows that the NSE effectively has a monopoly in the segment — something Sundararaman Ramamurthy, the new MD and CEO of the BSE, seems keen to tackle. Ramamurthy had, during an

event in March, said the BSE was considering restarting its Sensex-30 derivatives.

“There will be a fair bit of excitement as people are more interested in options trading nowadays. However, being a Friday, it could lead to bouts of volatility,” said Chandan Taparia, head (technical and derivatives research) at Motilal Oswal. He pointed out that given that people are habituated to the Nifty and Bank Nifty, getting used to the new routine could take time. This will work well for investors who are patient and are willing to learn before taking the plunge.

According to a notice in March, the bourse had reduced the lot size for Sensex F&O contracts to 10 from the present 15, and that of the Bankex F&O contracts to 15 from 20. This is smaller than the lot size of NSE’s Nifty contracts (50), and the Bank Nifty (25).

A ‘lot size’ essentially refers to the number of stocks one can purchase in a single transaction. This is controlled by the markets regulator, and is used to control price quotes in the market. Lot sizes are fixed in order to ensure uniformity and price standardisation of the bulk.

In an earlier interview to FE, Kotak Securities’ MD and CEO Jaideep Hansraj had expressed concerns over falling cash volumes, and said “options are going through the roof, which are leveraged; this shows people are getting into the riskier part of business”.

Market players say the new management has its sight set on attracting higher investor interest, given that the BSE’s market share in the F&O segment is negligible. “Most of the players don’t offer BSE derivatives products, so understanding the new product, the market dynamics and gauging investor interest will take time. However, competing with the NSE is not a realistic target as the BSE’s F&O presence is negligible,” said a market strategist at a brokerage.