Shares of the Bombay Stock Exchange (BSE), India’s oldest stock exchange, rose by 8% on Thursday, reaching ₹4,161 on the National Stock Exchange (NSE).
The surge came in response to new regulations announced by the Securities and Exchange Board of India (Sebi) aimed at curbing speculative trading in the futures and options (F&O) segment.
The new framework, effective from November 20, 2024, introduces several changes to regulate the high-risk F&O market. A significant proposal limits weekly derivatives contracts to just one benchmark index for each exchange, impacting both BSE and NSE, the two dominant players in India’s derivatives market.
Currently, NSE has a competitive advantage with expiry days scheduled on all weekdays except Friday, which restricts BSE’s opportunities for trading volume.
However, the new rule is expected to provide BSE with an additional three days to hold its expiry contracts, thereby creating a more level playing field and potentially boosting its trading volume in the derivatives market.
Motilal Oswal Financial Services noted that BSE would be “relatively less impacted” by the new regulations compared to NSE.
The brokerage pointed out that BSE has additional revenue sources, including its colocation segment and plans to introduce new products like commodities and power trading, which are expected to support its growth trajectory in the long run.
These regulatory changes aim to ensure a more stable and regulated market and were developed following recommendations from an Expert Working Group (EWG) established by Sebi to strengthen the equity index derivatives framework.
While BSE shares experienced a notable increase, the impact on other brokerage firms varied. Shares of Angel One, another brokerage firm, also rose by 7%, although there were concerns regarding the short-term effects of Sebi's regulations.
In contrast, stocks for other brokerages like IIFL Securities, Geojit Financial, and SMC Global Securities remained flat, while Motilal Oswal and 5paisa shares experienced a slight decline of around 1%.
The mixed market reaction indicates that while BSE is expected to benefit from the new rules, other firms may face challenges in terms of trading volumes.
According to Motilal Oswal, the full impact on companies like BSE and Angel One will become clearer once the regulations are fully implemented, but the initial investor response suggests optimism, particularly for BSE, which appears well-positioned to adapt to the changes and leverage its alternative revenue streams.