A) Why SEBI Is Trying to Discourage Retail Participation in F&O 

• SEBI’s FY25 study found that 91% of individual F&O traders suffered net losses.

• Total losses by retail F&O traders rose over 41% year-on-year to approximately ₹1.06 lakh crore.

Key Concerns:

• Lack of understanding about leverage and risk

• Influence of social media and financial influencers promoting speculative trades

• Financial distress among young and first-time investors

• Excessive churn in weekly options driven by intraday bets

SEBI’s Interventions:

• Increasing margin requirements

• Strengthening platform-level risk disclosures

• Introducing suitability tests and risk profiling

• Reviewing product design and option expiry structure

The objective is to protect retail investors while maintaining the integrity and utility of the derivatives market.

B) The Jane Street Saga: SEBI’s Crackdown on Market Manipulation

SEBI's Allegations:

• Jane Street allegedly purchased large quantities of Bank Nifty index stocks in both the cash and futures markets to artificially inflate the index.

• Simultaneously, it took significant short positions in index options to profit from the expected reversal.

As a result of these actions: 

• SEBI ordered Jane Street to return $550 million in alleged illegal profits.

• The manipulation strategy involved propping up Bank Nifty index stocks in cash and futures markets while shorting index options.

• Jane Street’s Response:    

  Jane Street denied the allegations and is preparing to legally challenge SEBI’s action. SEBI has accused Jane Street, a major Wall Street trading firm, of orchestrating an "intentional, well-planned, and sinister scheme" to manipulate the Indian derivatives market. According to SEBI, the firm executed a strategy aimed at distorting the Bank Nifty index for financial gain.

C) How NSE’s Tremendous Growth Over the Last Five Years Tied to F&O Volume Surge — Implications for NSE Unlisted Share

The National Stock Exchange (NSE) has recorded exceptional growth in the last five years, largely due to an exponential surge in the Futures & Options (F&O) segment. India has become the world's largest derivatives market by number of contracts traded, and NSE sits at the center of this development.

Key Growth Drivers:

• Massive rise in weekly options trading, particularly in Nifty and Bank Nifty

• Widespread retail participation fueled by mobile-based, low-cost brokerage platforms

• Robust technological infrastructure facilitating high-frequency and algorithmic trading

• NSE reported its monthly F&O turnover reaching ₹8,740 lakh crore in March 2024, up dramatically from ₹217 lakh crore in March 2019 

• The notional value of index options more than doubled to $907 trillion in FY 2023–24, compared to FY 2022–23 

• Retail investors’ share in index options climbed from 2% in 2018 to around 41% in FY 2024 NSE’s equity futures daily turnover doubled to ₹2.09 trillion, and equity options grew by 33% to ₹720 billion in the quarter ending June 2024 

Derivatives trading now contributes significantly to NSE's revenue through transaction charges, technology services, and clearing fees. This F&O-driven growth has also strengthened NSE’s global positioning, making it a dominant force in capital markets.

However, this reliance on F&O volumes also introduces vulnerabilities. Regulatory actions aimed at reducing retail speculation, such as higher margins or suitability norms, may impact short-term volumes. Thus, while the growth story remains strong, it is increasingly linked to policy shifts in the derivatives ecosystem.

 Conclusion: A Structural Balancing Act for Market Stability

SEBI’s 2025 regulatory strategy reflects a calculated effort to restore balance in India’s capital markets. While cracking down on excessive retail speculation in F&O, the regulator is simultaneously attempting to rejuvenate the agri-commodity derivatives space. Its actions against global entities like Jane Street further reinforce a commitment to market integrity. For the NSE, this period marks a transition—away from unchecked volume dependence toward a more stable, policy-aligned future that could shape the long-term outlook for its unlisted shares and overall capital market health.

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