The Bombay Stock Exchange (BSE) is preparing to broaden its footprint in the derivatives segment by introducing new monthly index option products and restructuring its Bankex index, according to media reports. The initiative follows regulatory changes by the Securities and Exchange Board of India (SEBI), which limited weekly derivative contracts to one index per exchange, prompting exchanges to explore alternative avenues for growth.
Bankex Index Reconstitution
As part of this plan, BSE is revamping the Bankex index to enhance its suitability for monthly derivatives trading. Four additional stocks—Canara Bank, AU Small Finance Bank, Punjab National Bank, and Union Bank of India—will be included in the index from December 26. This expansion will increase the total number of Bankex constituents to 14.
In parallel, BSE is modifying the index’s weighting methodology. The combined weight of the top three stocks will be capped at 45%, a change intended to improve diversification within the index.
Emphasis on Monthly Derivative Products
Reports indicate that BSE is considering the launch of two to three new monthly index option contracts. These products are aimed at building scale in longer-tenure derivatives and reducing dependence on weekly expiry contracts. Monthly options typically involve longer maturities compared to weekly contracts and are positioned as economically viable instruments for the market ecosystem.
Growth in Sensex Derivatives
The exchange’s focus on monthly derivatives is supported by the growth in its Sensex derivatives segment. Since the relaunch of Sensex options in May 2023, trading activity has increased steadily, with rising participation from brokers and foreign portfolio investors. This growth has contributed to BSE strengthening its position in the index derivatives space.
Broader Market Development Initiatives
According to reports, BSE’s longer-term approach involves encouraging trading activity beyond expiry-day volumes by promoting participation in non-expiry sessions and longer-dated contracts. The exchange is also investing in its GIFT City operations through technology upgrades and expansion of offshore product offerings as part of its overall development strategy.
Summary
BSE is planning to introduce new monthly index option products and restructure the Bankex index to expand its derivatives business. The Bankex revamp includes the addition of four banking stocks and changes to stock weightings. Alongside this, BSE is focusing on monthly derivatives, supported by strong growth in Sensex options since 2023, while also enhancing its GIFT City operations and offshore offerings.
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