Sebi blocks NCDEX and MSE’s entry into options market: report

India’s market regulator has stopped the country’s two newest exchanges from offering equity derivatives trading and asked them to first build up their stock trading operations, two regulatory sources with direct knowledge of the matter said.Late last year, the National Commodity and Derivatives Exchange (NCDEX) and the Metropolitan Stock Exchange (MSE) separately sought approval from the Securities and Exchange Board of India (SEBI) to launch and develop equity cash and derivatives products, stock exchange information showed.

NCDEX mainly trades agricultural commodities, while ‌MSE mainly offers ‌currency derivatives and has very small share volumes. Both exchanges have tried to diversify their activities.SEBI’s decision underlines continued caution against India’s soaring equity derivatives market, where premiums are now roughly double the cash market, compared with 2% to 3% in major global economies.

The regulator’s directive to exchanges, telling them to pause plans for derivatives products, has not been previously reported.

Despite steps taken to cool derivatives trading, India’s NSE remains the most active derivatives exchange, accounting for more than 70% of index options contracts traded globally, according to data from the World Federation of Exchanges.

Earlier this month, the government raised transaction taxes to help cool derivatives trading volumes. Research has shown that 90% of private investors suffer losses. SEBI wants there to be a gap of at least six months between the launch of cash equities and equity derivatives, the first source said. “Exchanges will not be allowed to launch derivatives until SEBI is satisfied that an underlying liquid money market exists.”

The regulator does not want new players to further stimulate trading in derivatives without first establishing an underlying money market, the source said.

“The exchanges will have to demonstrate that they have sufficient spot market participation, liquidity and pricing before being allowed to launch derivatives,” the second source said.

The sources declined to be identified because they are not authorized to speak to the media.

SEBI and NCDEX did not respond to requests for comment.

MSE did not answer questions about its equity derivatives plans, but referred Reuters to a statement last month that the company “is in the process of appointing market makers to strengthen liquidity and market depth in its equities segment.”

Stock trading in India is dominated by the NSE and its older peer BSE.

Both NCDEX and MSE raised capital in 2025 to fund their expansion into equities and upgrade technology.

NCDEX raised 7.7 billion rupees ($85 million) from 61 investors, including some global trading giants: Citadel Securities and Tower Research, a US-based high-frequency trading firm.

MSE raised Rs 12 billion from private equity firms including Peak XV Venture Partners Investments VII and leading Indian brokers including Groww and a unit of Zerodha.

SEBI has also asked the two stock exchanges to upgrade their technology before entering the equity segment.

“Until exchanges demonstrate robust technology, there is no question of them starting stock trading, let alone derivatives,” the first source said.