SEBI Eyes Longer Equity Derivatives Tenure: A Game-Changer for India’s F&O Market?

At the FICCI Annual Capital Market Conference in Mumbai on August 21, 2025, SEBI Chairman made a strong case for extending the tenure of equity derivatives contracts. The regulator is preparing to release a consultation paper that could pave the way for longer expiries, moving away from the current weekly contracts that dominate the market.

Why the Change?

The SEBI chief emphasized that weekly expiries have become increasingly misaligned with the market's broader needs:

• ❌ Poor for hedging: Short-term contracts fail to support long-term risk management.
  
  
• ❌ Speculation-heavy: Retail traders often speculate aggressively without risk controls.
  
  
• ❌ Prone to manipulation: Large trades in weekly contracts can distort market behavior.
  
  

Earlier, SEBI's internal study revealed that 93% of F&O traders lost money, with retail investors taking the brunt of losses. By contrast, proprietary desks and foreign institutions have consistently profited.

This imbalance prompted SEBI to introduce restrictive measures in recent years, including:

• Increasing lot sizes
  
  
• Limiting contract expiries
  
  
• Tightening margin norms
  
  

The push for longer maturities is now seen as the next step toward fostering proper hedging, long-term investing, and healthier cash market participation.

Market Impact: Exchanges & Brokers Under Pressure

The announcement rattled markets immediately:

• 📉 Nifty Capital Markets index dropped 2.04%
  
  
• 📉 BSE Ltd. fell as much as 7.5% intraday
  
  
• 📉 Angel One slid nearly 8%
  
  
• 📉 Brokerage-linked stocks like MCX and Motilal Oswal also weakened
  
  

The sharp reaction highlights investor fears of revenue impact, especially for exchanges like BSE, where 70%+ revenues come from transaction charges. A shift to monthly or bi-monthly expiries could dampen trading volumes and, by extension, fee income.

What’s Next?

As of August 22, 2025, SEBI has not finalized its decision or announced a timeline. However, the proposal marks a pivotal shift in India’s derivatives market structure.

If implemented, it could:
✅ Encourage serious hedgers and institutions
✅ Promote market depth in the cash segment
✅ Reduce retail speculation-driven volatility
⚠️ But also risk lower exchange and broker revenues in the short term

Outlook

The debate over weekly vs. longer-dated contracts could reshape the very character of India’s F&O market. While retail traders may see fewer “lottery-ticket” opportunities, the broader ecosystem could benefit from stability, risk management, and institutional confidence.

For now, traders and investors alike will be watching SEBI’s consultation paper closely, as it may define the next phase of India’s market maturity journey.

Key Takeaway: SEBI’s move to extend derivative maturities aims to protect retail investors and promote stability, but it could hit exchange revenues and short-term volumes. The balancing act between market safety and business interests will determine the outcome.