The Securities and Exchange Board of India (SEBI) is preparing to gradually reform the tenure and maturity profile of equity derivatives products in order to make them more effective for hedging and long-term investing, chairman Tuhin Kanta Pandey said on Thursday.
Speaking at the FICCI Capital Market Conference 2025, Pandey noted that trading in the cash market has seen remarkable growth, with daily volumes doubling over the past three years. “We will consult with stakeholders on how best to improve the maturity profile of derivatives in a calibrated manner so that they better serve both risk management and long-term investment needs,” he said.
Balancing Growth and Stability
The SEBI chief underlined that while equity derivatives are an essential tool for capital formation, the regulator must strike a balance between growth and quality. A stronger framework, he argued, will ensure that derivatives are used more responsibly and effectively.
SEBI recently conducted a detailed study of trading patterns across all investor categories—including individual investors—covering the period between December 2024 and May 2025. The analysis was aimed at assessing the real impact of the new measures introduced on October 1, 2024 to strengthen the equity index derivatives (EDS) framework.
Key Findings of the Review
- Index options turnover: Down 9% year-on-year in premium terms and 29% in notional terms. However, compared to two years ago, turnover is up 14% (premium) and 42% (notional).
- Individual investor turnover in EDS: Declined 11% year-on-year in premium terms, but up 36% compared with the same period two years ago.
The figures suggest that while SEBI’s October 2024 reforms have tempered speculative activity in the short term, overall participation remains higher than it was two years earlier.
The Road Ahead
Market experts believe that SEBI’s calibrated approach to extending the maturity of derivative products could help deepen India’s capital markets by making them more attractive for institutional investors, pension funds, and long-term hedgers.
“Lengthening the maturity profile is a natural step for markets transitioning from short-term speculation toward long-term stability,” said a senior market strategist. “This will align India’s derivatives market more closely with global standards.”
