- SEBI has barred NCDEX and MSE from launching equity derivatives initially
- Exchanges must build liquid cash equity markets before derivatives approval
- A six-month gap is required between cash equity start and derivatives launch
Market regulator Securities and Exchange Board of India has stopped the country's two newest exchanges from launching equity derivatives and has asked them to first build up trading in cash equities, Reuters reported on Tuesday quoting two people with direct knowledge of the decision.
The move affects the National Commodity and Derivatives Exchange and the Metropolitan Stock Exchange, both of which had approached the regulator for approval to enter equity cash and derivatives trading in December.
SEBI has set a minimum time gap between the start of cash equity trading and the launch of equity derivatives, Reuters reported quoting the above people. The regulator wants exchanges to establish a liquid and active cash market before allowing derivative products.
"SEBI wants there to be a gap of at least six months between the launch of cash equities and equity derivatives,” one of the people told Reuters, adding, "Exchanges will not get permission to launch derivatives until SEBI is satisfied there is an underlying liquid cash market."
The second person told Reuters that the exchanges would need to meet clear benchmarks before getting approval. "The exchanges will be required to demonstrate sufficient cash market participation, liquidity and price discovery before being permitted to launch derivatives," the person told the news agency.
SEBI, MSEI and NCDEX did not immediately respond to a request for comment by NDTV Profit at the time of publishing this story.
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The guidance followed applications made by both exchanges late last year. In December, NCDEX and MSE separately sought SEBI's approval to launch equity cash segments and, over time, equity derivatives.
The decision marks a setback for their plans to expand beyond their existing businesses, particularly at a time when the regulator is tightening oversight of the derivatives market.
Earlier developments had pointed to a strategic shift by MSE. In June 2025, NDTV Profit reported that the exchange was planning to enter the cash equities segment after SEBI introduced new norms on expiry days for derivatives contracts. People aware of the plans said at the time that MSE already had the required regulatory approvals and expected the move to take shape within two to three months.
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Following fresh approval from SEBI, MSE was also expected to use Tuesday as its derivatives expiry day, which would have placed it alongside the National Stock Exchange. This marked a change from its earlier plan to use Friday as the expiry day as part of efforts to build its derivatives franchise.
During the last meeting of a SEBI-appointed committee on derivatives market reforms, MSE and NCDEX had opposed a proposal to limit weekly derivative contract expiries to two days, NDTV Profit reported. Since then, people familiar with the matter have said NCDEX has decided to stay out of the competition for an expiry day.
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