SEBI Stalls New Exchanges Entry into Equity Derivatives Market

As per Reuters report, India’s market regulator has directed the country’s 2 newer exchanges to pause plans for launching equity derivatives, asking them to first strengthen their equity cash market operations and technology infrastructure. 

Regulatory Direction on Derivatives Launch 

The Securities and Exchange Board of India (SEBI) has stopped the National Commodity and Derivatives Exchange (NCDEX) and the Metropolitan Stock Exchange (MSE) from offering equity derivatives trading.  

Both exchanges had sought approval in late 2025 to introduce equity cash and derivative products as part of business diversification. 

Focus on Cash Market Liquidity 

NCDEX primarily operates in agricultural commodities, while MSE mainly offers currency derivatives and reports limited equity volumes.  

SEBI has instructed that exchanges must first establish adequate cash market participation, liquidity, and price discovery before seeking approval for equity derivatives. 

Cooling Measures in Derivatives Segment 

The directive reflects regulatory caution amid high activity in India’s equity derivatives market, where premiums are estimated to be nearly 2 times the size of the cash market.  

In comparison, major global markets typically record derivatives premiums at around 2% to 3% of cash market size. 

Market Structure and Trading Concentration 

India’s derivatives trading remains concentrated, with the National Stock Exchange accounting for over 70% of global index options volumes, as per data from the World Federation of Exchanges. Equity trading in India continues to be dominated by NSE and BSE. 

Read More: SEBI Sets May 1, 2026 Deadline for AIFs to Report Independent NAVs to Depositories! 

Capital Raising and Technology Requirements 

Both NCDEX and MSE raised capital in 2025 to fund equity expansion and technology upgrades. NCDEX raised ₹770 crore from 61 investors, including global trading firms, while MSE raised ₹1,200 crore from private equity investors and brokerage firms.  

SEBI has also asked both exchanges to upgrade their trading technology before entering the equity segment. 

Conclusion 

The regulatory communication outlines SEBI’s emphasis on cash market development, liquidity depth, and technology robustness before permitting new exchanges to enter the equity derivatives space. 

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