Brokers, SEs face tougher futures and options as Sebi bids to curb F&O frenzy

India’s stock brokers are gearing up for challenging times ahead as the likelihood of stricter norms in equity derivatives is expected to aggravate the industry’s woes already weighed down by a slew of regulatory tightening measures and higher taxes on options trading. Broking officials and analysts said the profitability of these firms, especially discount brokers like Zerodha, Groww, and AngelOne, and even stock exchanges could be hit by these moves.

On Tuesday, the Securities and Exchange Board of India (Sebi) in a consultation paper proposed to make it more expensive for individual traders to trade in index futures and options and scrapped some weekly products to curb the exuberance in the Indian equity derivatives market.

“We see exchanges and retail-focused brokers being most affected from the proposed changes,” said Jefferies in a cliant note. The brokerage said the likely impact of Sebi’s move on Zerodha, Angel One and Paytm Money will be ‘very high’.

“BSE can offset impact and even gain, if volumes spillover from discontinued products,” it said. BSE shares rose 6% on Wednesday to ₹2,559. NSE’s unlisted shares have declined 10-12% in the past month to ₹5,400 in the unofficial market, said brokers, on expectations of the tighter derivative regulations. Among brokers, AngelOne gained 1.2% on Wednesday. The stock is down 16% in the past one month.

Tougher Times for Brokers

These measures will have a 33% and 24% negative impact on NSE and BSE profits, respectively, for FY26, according to an estimate by IIFL Securities.“If all the seven proposals are implemented as suggested, this could significantly erode volumes in derivatives,” said B K Sabharwal, chair of the capital market & commodity market committee at the PHD Chamber of Commerce and Industry.Sabharwal advised Sebi to implement the proposals in a phased manner.

“In 2014 Korea implemented simi lar measures in the backdrop of similar concerns. However, the market there never recovered despite many attempts by the regulators to revive business activity and even 10 years later the volumes are lower than that in 2014.”

Some brokers see more measures by Sebi. “We may see more measures, including product suitability, customer-level certification, etc and all these measures are expected to rationalise equity derivatives volumes,” said Dhiraj Relli, MD & CEO of HDFC Securities.

Brokers said the regulator’s recent moves to include revised charges for basic service demat ac counts (BSDA) from September 1, and uniform exchange transaction charges from October 1 without any discounts based on trading volumes could impact brokers’ profits by 20-50%. Sebi is also looking to bring in ASBA (Application Supported by Blocked Amount) for secondary market trades, which could dry up brokers’ ‘float income’.

“Discount brokers are likely to be more impacted than traditional full-service brokers given their dependence on retail investors,” said Devesh Agarwal, analyst at IIFL Securities.

“We see a higher impact for NSE, as options account for about 60% of its revenues, while for BSE it is about 40%. We estimate a 25-30% impact on NSE’s FY26 estimated earnings and 15-18% for BSE.”