Zerodha entry lifts BSE’s options game

The market share of BSE in the derivatives segment, dominated by National Stock Exchange (NSE), rose from a mere 0.004% in the June quarter to 7.38% in the September quarter and further to 15.8% in the December quarter.

In the June 2023 quarter, Zerodha held 3.7% stake in BSE as a non-promoter non-public shareholder, and its name didn’t figure in the public shareholder category, NSE data shows. At the end of September quarter, Zerodha, acting in concert with NKSquared and Kamath Associates, held 4.39% of BSE’s equity capital. As Zerodha is shown as non-promoter non-public shareholder with 3.7% in the September quarter, this implies the other two entities purchased 0.69% during the period.

NKSquared Global was founded by Nikhil Kamath, who along with his brother Nithin Kamath, is Zerodha’s co-founder. Kamath Associates was set up as a sub-broker to Reliance Money in the 2000s. In 2010, the Kamath brothers co-founded Zerodha, which claims to be India’s largest stock broker contributing 15% of all daily retail order volumes in futures and options (F&O), stocks and initial public offerings, among others.

Zerodha declined to comment on Mint’s queries about the nature of its stake in BSE and on whether its clients were enhancing liquidity of Sensex options by increased trading participation in the product. BSE also declined to comment.

However, Alok Churiwala, the managing director of Churiwala Securities, a BSE registered broker, said, “The presence of big brokers as trading members helps impart liquidity to any exchange product, thanks to the sheer size of their clientele who are hungry to trade on segments like F&O despite several Sebi (Securities and Exchange Board of India)-mandated risk disclaimers on trading such products.”

While giving credit to BSE managing director and chief executive Sundararaman Ramamurthy’s “untiring efforts” to gain traction in the F&O segment, Uttam Bagri, former chairman of BSE Brokers’ Forum, said, “The stars aligned with BSE’s focus on Sensex derivatives and led to an explosion of trading interest at the retail level post-covid whose online access was seamlessly enabled by new-age brokers.”

NSE and BSE accounted for F&O turnover of ₹9,001 trillion in December 2023, almost 400 times the cash market turnover of ₹22.72 trillion that month. Index options account of almost all of the F&O turnover.

BSE launched a Sensex weekly contract on 16 May with Friday expiry to avoid clashing with Nifty and Bank Nifty options’ expiry on Thursday.

This was seen yielding fruit for Asia’s oldest exchange, but the presence of Zerodha as a trading member contributed in no less measure to the success of the contract, market constituents said.