SEBI Flags Derivatives Imbalance: Short-Term Options Overshadow Cash Market, Calls for Deeper Reform

India’s market regulator, the Securities and Exchange Board of India (SEBI), has raised fresh concerns over the explosive growth of short-term equity derivatives, particularly index options, which now overshadow cash market volumes by over 350 times on expiry days. In a recent statement, a SEBI Whole-Time Member warned that this imbalance is “clearly unhealthy” and detracts from the core purpose of capital markets—long-term capital formation.

 

Key Concerns Raised by SEBI

Regulatory Measures in Motion

To curb speculative frenzy and protect retail investors, SEBI has proposed and begun implementing several reforms:

These changes will be rolled out in phases starting November 20, 2025.

 

Expert Commentary

“The derivatives market has become a speculative playground. SEBI’s reforms aim to restore balance and refocus investor attention on long-term value creation,” said a senior market strategist at Axis Securities.

 

Sources: Times of India, Financial Express, FIA – Explainer, Hindustan Times, Economic Times