Traders remained under the impression that more restrictions would hit Indian options

The Indian derivatives crisis was successful in curbing the options exuberance that burned millions of retail investors, but traders were left in the dark as to whether new restrictions are coming that will further change the market.Investors and strategists are watching whether the Securities and Exchange Board of India will halt weekly contracts on the benchmark NSE Nifty 50 Index and S&P BSE Sensex Index, the only two remaining weekly contracts after the regulator drastically reduced their numbers. There have been no updates since the SEBI chairman mentioned an upcoming discussion paper on the subject in August, and the man who led the crackdown has now left.

SEBI did not respond to an email seeking comment.Weekly options — low-cost instruments that provide short-term coverage — have been a key driver of the country’s boom in recent years, and eliminating them completely would go against the global shift toward shorter maturities. The contracts were also at the heart of Jane Street Group’s highly profitable India strategy, which prompted SEBI to briefly block the company and open an investigation that is still ongoing. Jane Street has denied all allegations.

“If the weeklies are scrapped, it will lead to a drastic drop in trading volumes,” said Chandan Taparia, head of derivatives and technical business at Motilal Oswal Financial Services. “Foreigners and local traders need a tool to hedge short-term volatility, and weeklies serve that purpose well.”

In December, the volume of index options traded on leading exchange National Stock Exchange of India Ltd. tripled. with weekly expirations. Globally, the popularity of shorter-term contracts has skyrocketed: in the US, so-called ‘zero-days to expiration’ options were introduced in 2022, which now represent more than half of the total options volume of the S&P 500 Index. In Hong Kong, the stock exchange is said to be examining daily expirations following the expansion of weeklies.

Weekly options were introduced in India in 2016 and soon exchanges started offering them at different levels. Those on the NSE Nifty Bank Index once accounted for more than half of total index options turnover.

But as private investors lost billions of dollars on derivatives, the regulator began taking measures to stem the increase. Ananth Narayan, whose term as a full-time member at SEBI ended in October, led the effort. The first major step, taken in November 2024, was to remove the weeklies from the Nifty Bank Index and ask the exchanges to retain only one such contract. The NSE chose the Nifty 50 for its underlying security, and BSE Ltd. opted for the Sensex.

The regulatory measures – which also include higher margin requirements and stricter position limits – pushed volume down last year for the first time since 2017 data. Derivatives turnover on NSE fell to almost 515 trillion rupees ($5.7 trillion) in 2025, a 20% decline from 2024.

“Retail options trading was like driving a Ferrari with bicycle brakes: fast but fragile,” said Foram Chheda, founder of Mumbai-based research house ChartAnalytics. “SEBI’s regulations have helped curb this.”

Some market participants say the decline reflects the normalization of a market that has spiraled out of control. While fewer weeklies and lower volatility have hurt strategies that profit from options sales, Indian derivatives now have a “healthier mix of participants,” said Bhautik Ambani, CEO of AlphaGrep Investment Management.

Andrew Holland, head of new asset class at Nippon India Mutual Fund, says the Indian options market is poised to grow as institutional funds increase their derivatives mandates and exchanges add more equity options. Average daily notional turnover has recovered from early 2025 lows, and the listed exchange reported better-than-expected quarterly profits with a rise in share options market share.

“The options market will continue to grow and deepen, with or without weekly contracts,” he said. “Liquidity has never been a problem.”