SEBI’s Weekly Options Crackdown: A Big Shift for NSE — What It Means for Its Unlisted Shares

SEBI’s 2024 Reform: Limiting Speculative Excess

SEBI’s move to unwind weekly options contracts on the NSE could mark a turning point for the exchange. More than being a regulatory adjustment, this change threatens the very underpinnings of NSE’s derivatives-led business model. For unlisted investors in NSE, the stakes are clear: revenue compression, reduced volatility, and a need to assess long-term business strength.

The regulatory journey began in November 2024, when SEBI introduced a stringent rule — only one index per exchange can retain a weekly expiry. For the NSE, that meant only Nifty 50 survived; Bank Nifty, FinNifty, and Midcap Nifty were stripped of their weekly options. Remaining contracts were restructured into monthly expiries, typically ending on the final Thursday of each month.

This policy was aimed squarely at curbing speculative intensity and reducing the risk that retail traders take on. By limiting ultra-short-dated contracts, SEBI hoped to moderate the frenetic churn that often drives sharp intraday volatility.

SEBI’s Proposed 2025 Reforms: No More Weekly Options

SEBI’s Proposed 2025 Reforms: No More Weekly Options

As of 2025, regulators are pushing further. SEBI is reportedly proposing to ban weekly options on all indices, including the Nifty 50. The suggested reforms include:

• Phasing out weekly expiries and switching to bi-monthly or monthly contracts

• Lowering cash-market margin requirements to favor delivery-based trades

• Encouraging delivery-based equity investing by recommending STT cuts

In essence, SEBI wants to move away from speculative trading and nudge participants toward long-term, equity ownership behavior.

How Much NSE Relies on Derivatives

NSE has built a significant part of its revenue engine on derivatives. Weekly options, in particular, contribute heavily to transaction charges — a core part of its business model. High-frequency traders, retail speculators, and arbitrageurs drive much of this volume, and these are exactly the segments SEBI is targeting with its reforms.

If weekly options are eliminated, NSE’s transaction fee income could face a material shortfall. For unlisted investors, this means a real risk that projected earnings will need to be recalibrated downwards, assuming volumes do not rebound strongly in redesigned contracts.

A Long-Term Rebalancing Opportunity

While short-term commercial pain for NSE seems inevitable, the reforms present a potential silver lining. SEBI’s strategy is not purely punitive — it is also supportive of long-term equity market health. By making delivery-based investing more attractive (via lower margins and STT incentives), regulators may foster deeper participation in the cash market.

If successful, this could help NSE diversify its revenue mix beyond derivatives to include higher cash-market volumes, more IPO activity, and value-added services like data analytics and index licensing. Over time, this could make NSE less vulnerable to the boom-bust cycles of options speculation.

What This Means for Unlisted Shareholders

Short-Term Risks

• Earnings pressure from reduced derivative trading

• Potential revaluation or markdown in unlisted share price

• Heightened uncertainty around financial projections

Medium- to Long-Term Upside

• A more resilient, diversified business model

• Lower volatility, improved investor confidence

• Greater potential for sustainable cash market growth and stable fee streams

If you believe in NSE’s long-term leadership in India’s capital markets — technology, scale, brand — this transition may merely be a phase of consolidation. Valuation dips caused by regulatory shifts could present an accumulation opportunity.

Key Risks to Monitor

Several risk factors could influence how successful this transition is for NSE:

• Persistent margin and volatility pressure may keep derivatives activity subdued

• Competition from other trading platforms or exchanges could erode its dominance

• Policy flip-flops if reforms are not well calibrated or if market response is weak

• Delayed or weak recovery in cash market volumes

• Regulatory overhang if SEBI introduces additional trading restrictions or penalties

ultra’s Verdict

SEBI’s crackdown on weekly options is not a simple regulatory tightening — it is a structural pivot. For NSE, the transition away from the most speculative corners of its derivatives business could hurt in the short run, but potentially make its business more durable and less dependent on volatile flows.

From an unlisted-investor perspective, this is a moment to lean into disciplined analysis. Short-term revaluation might test conviction, but the long-term reward could be meaningful if NSE successfully reinvents itself as a broader capital market infrastructure company.

FAQs

1. Why is SEBI targeting weekly options specifically?

SEBI believes that weekly options amplify speculative trading and risk among less sophisticated retail traders, which can lead to market instability.

2. Will NSE’s revenue really take a hit?

Yes — derivatives, especially weekly options, contribute a large share of the exchange’s transaction fee income, so a cut could meaningfully impact its earnings.

3. Can NSE make up for lost derivatives income?

Potentially. By boosting revenue from cash trading, IPOs, and data services, NSE can rebalance its business in a more sustainable way.

4. Is this a buying opportunity for NSE’s unlisted shares?

If you’re focused on the long-term, this could be a compelling moment to accumulate, especially if short-term earnings pressure weighs on valuations.

5. What major risk should unlisted investors watch?

Regulatory risk remains high. Any changes in the reform’s implementation or additional restrictions could further impact NSE’s business model.