The Association of National Exchanges Members of India (ANMI), which represents the largest group of stock brokers in the country, has made a formal appeal to the Securities and Exchange Board of India (Sebi). The association is urging the market regulator to permit the National Stock Exchange (NSE) to bring back weekly options contracts on the Bank Nifty index.
The Regulatory Crackdown and Its Immediate Impact
This request comes after Sebi took a significant step in October 2024 to curb retail investor losses in equity options. Concerned by the mounting losses, the regulator directed exchanges to offer only a single weekly contract on any benchmark index. Following this directive, the NSE halted the trading of Bank Nifty weekly options starting November 2024.
The immediate consequence was a sharp and severe drop in trading volumes on the exchange. This decline directly translated into lower revenues for the bourse itself. The ANMI letter highlights the cascading effect of this decision on the broader market ecosystem.
Widespread Consequences: Jobs and Government Revenue
According to the brokers' association, the discontinuation of these popular contracts has led to tangible negative outcomes. Job losses at various brokerages have been reported as a direct result of the reduced market activity. Furthermore, the government is seeing a dip in crucial tax collections.
The contraction in trading turnover means lower revenue from:
- Securities Transaction Tax (STT)
- Goods & Services Tax (GST) on brokerage fees
- Other ancillary charges linked to high-volume trading
ANMI pointed out that while exact employment figures are not public, the volume drop strongly suggests a shrinkage in support roles. Positions such as dealers, sales personnel, and back-office staff, which are closely tied to handling high-turnover weekly contracts, have been affected.
The Staggering Scale of the Volume Shift
The letter provided critical data to underscore the importance of these instruments. Estimates show that during the first half of the fiscal year 2024-25 (FY25), premiums from weekly options on the Bank Nifty index made up a substantial 74% of the total premiums in all Bank Nifty options.
The removal of this product led to a massive shift or outright disappearance of trading volumes from the NSE. ANMI stated that the premium turnover for index derivatives has plummeted by approximately 35-40% since November 2024. This severe contraction has adversely impacted all government revenue streams connected to this trading activity.
In its appeal, ANMI has framed the issue not just as a market structure concern but as one with real economic repercussions, affecting employment in the financial sector and the national exchequer's income.
