43 mins ago
Prop Traders Retreat as NSE Derivatives Market Faces Tighter Rules
Professional trading firms are doing less business on India’s biggest stock exchange.
In August, they made up 54.7% of trading in futures and options.
That was their smallest share since December 2022.
Their share was about 62% in November 2024.
New trading restrictions and limits on bank funding have made some strategies more expensive.
A new closing auction has also had few participants and caused bigger price movements.
Individual investors now represent a larger share of cash-equity trading.
India’s market regulator is considering changes to the auction system.
Proprietary traders accounted for 54.7% of NSE equity-derivatives turnover in August, the lowest share since December 2022.
Their share fell from about 62% in November 2024, when regulators introduced broad curbs on speculative trading.
The NSE’s closing auction, launched August 3, has faced thin liquidity, sharper price swings and reduced opportunities for arbitrage and market-making.
New restrictions on bank funding for proprietary trading took effect in July, adding to limits on weekly contracts and leverage.
SEBI proposed possible changes to the closing-auction framework on September 12 and sought public comments by October 3.
- Who
- Proprietary trading firms, individual investors, the National Stock Exchange of India Ltd. and the Securities and Exchange Board of India are involved.
- What
- Proprietary traders’ share of NSE equity-derivatives turnover has declined amid market-structure problems and tighter trading restrictions.
- Where
- At the National Stock Exchange of India Ltd. in India.
- When
- The decline was reported for August; the closing auction began on August 3, and SEBI proposed changes on September 12.
- Why
- Regulatory curbs, tighter leverage and funding rules, and a poorly attended closing auction have made some professional trading strategies less profitable.
Key facts
- August derivatives turnover
- 193 trillion rupees in notional daily futures and options turnover
- Proprietary traders’ August share
- 54.7% of NSE equity-derivatives turnover
- Previous comparison
- About 62% in November 2024
- Lowest level since
- December 2022
- Retail cash-equity share
- 33.5% in August, up 53 basis points month-on-month
- Closing auction launch
- August 3
- Public-comment deadline
- October 3, following SEBI’s September 12 proposal
Quotes
Hariselvan Radhakrishnan
Chief executive officer of research firm HST Wealth
“The days of prop desks dominating NSE options turnover are behind us”
livemint.com
Sources
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