Should Sebi ban weekly options? Here’s what Zerodha’s Nithin Kamath thinks – News Air Insight

As speculation mounts over Sebi’s upcoming consultation paper that may propose banning weekly index expiries, Zerodha founder and CEO Nithin Kamath said that from an outsider’s perspective, a complete ban on weekly options would make sense.

In a post on X (formerly Twitter), Kamath added that he wouldn’t be surprised if weekly expiries were banned altogether or if Sebi introduced a stricter product suitability framework, making futures and options trading more difficult for retail investors.

“Regulatory risk is by far the biggest risk for brokers like us. This risk is magnified even more because most brokers’ earnings are from traders, and we earn almost nothing from investors,” Kamath wrote, pointing to the sharp 40% fall in exchange option volumes since the number of weekly expiries was reduced. He added that if the remaining two weekly expiries were also removed, volumes would likely drop back to 2019 levels, a scenario that could force brokerages to rethink their business models, Kamath, 45, said.

On his personal view, Kamath struck a nuanced note: As a brokerage CEO, he said weekly expiries coupled with a product suitability framework “sound reasonable,” but as an outsider to the industry, he would “understand the logic behind completely removing weekly expiries.”

Over the past year, Sebi has been cracking down on the options market after multiple surveys pointed to heavy retail losses.

Last month, the capital markets regulator floated the idea of extending the maturity and tenure of derivative contracts. It has also recently rolled out fresh measures to strengthen the market, including a shift to delta-based calculation of open interest instead of notional open interest.This change impacts large market participants and could have longer-term implications for trading volumes while potentially reducing market volatility.Through a six-step framework introduced late last year, Sebi also brought in several checks-ranging from increasing the contract size of options to limiting weekly expiries to one per exchange. These rules followed a study that found retail traders had gambled away nearly Rs 1.8 lakh crore in volatile trades over the past three years.

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