‘Thousands of crores of broker profit...’: Aviral Bhatnagar highlights ‘massive collapse’ in Bank Nifty options post new F&O rules 

Aviral Bhatnagar, Founder and Managing Partner of AJVC, highlighted a massive drop in Bank Nifty futures following the new rules for the futures & options (F&O) segment in play. Bhatnagar also claimed that “turnover has reduced by 50 percent, indicating the low-ticket retail investor has fled”. 

In a post on X, Bhatnagar wrote, “Options of Nifty Bank collapsed 90% from 200M trades daily to 20M. Turnover has reduced by 50%, indicating the low-ticket retail investor has fled.” 

Retail investors typically account for a significant portion of options volume, particularly in high-leverage products like Nifty Bank options. Brokers, especially those reliant on retail investors, may face significant profit declines. Many brokers generate a substantial portion of their revenue from options trading, particularly from the volume-based commissions. 

“Brokers, which probably have 50-60% of their profit from this, will see a hit of 20-30%. Thousands of crores of broker profit gone,” Bhatnagar added.  

It is to be noted that weekly Bank Nifty options have been officially discontinued, a fact that has highlighted by some of the social media users on Bhatnagar’s post. 

With the new rules for the futures & options (F&O) segment in play, the average daily trading volumes for options contracts across indices and stocks have seen a significant decline. 

Last week, the daily average turnover for Nifty Bank dropped nearly 33 percent, while Bankex experienced a drastic 98 percent decrease. In contrast, however, the Nifty and Sensex contracts saw increases in their average daily turnover by 40 percent and 14 percent, respectively. Overall, NSE’s options turnover rose marginally, while BSE saw a slight decline. 

For Nifty Bank, the average daily value traded (ADVT) declined to Rs 12,259 crore from Rs 18,250 crore in the previous week, while Bankex saw a sharp drop to Rs 41 crore compared to Rs 1,927 crore. In contrast, Nifty and Sensex recorded significant increases in ADVT, with Nifty rising 40 percent to Rs 41,301 crore from Rs 29,474 crore and Sensex increasing 14 percent to Rs 8,314 crore from Rs 7,301 crore.  

Overall options volumes showed a marginal increase on the NSE, rising to Rs 62,511 crore from Rs 59,615 crore, while the BSE saw a decline, with volumes dropping to Rs 8,355 crore from Rs 9,228 crore in the previous week. 

New F&O regulations

The Securities and Exchange Board of India (SEBI) has introduced several new rules for futures and options (F&O) trading to curb speculative trading and protect investors.

Minimum contract size: The minimum derivative contract size has been increased to at least Rs 15 lakh crore.  

Weekly expiries: The number of weekly F&O contracts has been reduced, with exchanges only offering one weekly index derivative contract.  

Extreme Loss Margin (ELM): An additional 2% ELM has been applied to short index options contracts on the expiry day.  

No calendar spread benefits: The practice of calendar spreads, which involves offsetting positions across different expiries, has been eliminated for contracts expiring on the same day.  

Upfront collection of premium: Brokers are required to collect an option premium upfront from traders.  

Position limits: The overall position limit for trading members has been increased to Rs 7,500 crore or 15% of the total open interest in the market, whichever is higher.  

STT on sales:  The STT on sales of futures in securities has increased from 0.0125% to 0.02% of the price at which such futures are traded. The STT on the sale of an option in securities has increased from 0.0625% to 0.1% of the option premium.  

Eligibility: Companies must be among the top 500 in India in terms of market capitalization and daily trading activity to be eligible for F&O trading.