Explained: BSE shares gain 8% after Sebi’s F&O curbs. Here’s why

Shares of BSE, India’s oldest stock exchange, surged 8% on Thursday, reaching Rs 4,161 on the National Stock Exchange (NSE).
The rise followed the announcement of new regulations by the Securities and Exchange Board of India (Sebi) to curb activity in the futures and options (F&O) segment.
These measures are seen as giving BSE an advantage over its larger rival, NSE, in the derivatives market.
Sebi’s new framework, which comes into effect on November 20, 2024, aims to regulate the high-risk F&O market through several changes.
Among the key proposals is the decision to limit weekly derivatives contracts to just one benchmark index for each exchange. This rule directly affects BSE and NSE, the two major players in India’s derivatives market.
Currently, NSE has the upper hand with expiry days on all weekdays except Friday. This leaves BSE with limited opportunities to compete in terms of trading volume.
However, under the new rule, BSE will gain three additional days to hold its own expiry contracts, levelling the playing field. This change is expected to boost BSE’s volume in the derivatives market, leading to the rise in its share price.
Motilal Oswal Financial Services, a prominent brokerage firm, commented that BSE would be “relatively less impacted” by the new regulations compared to NSE.
The brokerage highlighted that BSE has additional revenue sources like its colocation segment and the introduction of new products, such as commodities and power trading. These are seen as positive factors that can help BSE maintain its growth trajectory in the long run.
These changes are aimed at curbing speculative trading and ensuring a more stable and regulated market. The framework was developed following recommendations from an Expert Working Group (EWG) formed by Sebi to strengthen the equity index derivatives framework.
While BSE’s shares experienced a strong surge, the impact on other brokerage firms has been mixed. Shares of brokerage firm Angel One, also gained 7% despite concerns over the short-term impact of Sebi’s regulations.
However, other brokerage stocks like IIFL Securities, Geojit Financial, and SMC Global Securities remained flat. Motilal Oswal and 5paisa shares fell slightly, by about 1%. The difference in market reaction shows that while some firms like BSE are expected to benefit from the new rules, others might face more challenges, especially in terms of trading volumes.
According to Motilal Oswal, the true impact on companies like BSE and Angel One will only become clear once the rules are fully implemented. However, the initial response from investors suggests optimism, especially for BSE, which is seen as having the flexibility to adapt to the changes and leverage its other revenue streams.