MSEI investors uncertain about their bet after Sebi expiry day rule

Mint

03-06-2025

Broking firms and their founders who backed Metropolitan Stock Exchange of India (MSEI) are uncertain about the fate of their investments after the market regulator limited the weekly expiry of index options to two days, according to executives at two of the four companies.
However, these investors have no immediate plan to divest their stakes in MSEI, the executives said on the condition of anonymity.
Groww's parent Billionbrains Garage Ventures Pvt; Rainmatter Investments, backed by the Kamath brothers of Zerodha; Share India Securities Ltd; and Securocorp Securities India Pvt Ltd had purchased a combined 19.84% stake in the exchange for ₹238 crore on 24 December last year.
The investments were made before Sebi's consultation paper of 27 March seeking public comments on its proposal to limit the weekly option expiry days. On 26 May, Sebi's circular–titled Final Settlement Day (Expiry Day) for Equity Derivatives Contracts–curtailed the expiries for hugely popular index options to Tuesday and Thursday every week.
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The investors purchased the stake assuming that Sebi would let each exchange launch index options on one day of their choice every week, per a 1 October circular last year mandating a single expiry per exchange per week, among other things, the executives quoted earlier said.
However, Sebi's circular last month mandating two days of expiry for multiple exchanges means that MSEI will be locked in a fight for market share with either BSE Ltd or the National Stock Exchange when Sebi approves a weekly expiry for the bourse.
NSE had a three-month rolling market share of 80% in equity options (index plus stock options' premium turnover) as on 30 April, with BSE accounting for the rest, according to NSE data.
'The latest regulation on final expiry day will impact the MSEI plan to gain traction through the weekly expiry option, given the competition the bourse will face from the established exchanges as and when it gets regulatory approval for such a contract," said the first executive quoted earlier.
'This, in turn, will make the fate of our investment uncertain. But, we will not sell our stake because of this new rule as we typically invest for the long term. We will wait and see."
'We are staring at uncertainty over our investment in the exchange," said the second executive. 'When we invested, the idea was that we could have our tailored contracts traded on days there are no expiry from BSE or NSE to differentiate ourselves. But, if our contracts are forced to have expiry on the same day as any of the big exchanges, our derivative products will be a non-starter. It's kind of unfair for Sebi to leave us with little option."
Queries emailed to the four investors and MSEI on their plans ahead went unanswered. A Sebi official, too, was unavailable for comment until press time.
Renewal of recognition
The problems of revival for MSEI come ahead of the exchange's renewal of its recognition by Sebi on 15 September this year. The exchange gets a renewal every year.
Of the six Sebi-recognised exchanges, MSEI is the only one that hasn't received permanent recognition from the regulator. The ones permanently recognized by Sebi are NSE, BSE, NCDEX, MCX and the Calcutta Stock Exchange.
Queries emailed to Sebi and MSEI on the reason for its annual renewal went unanswered.
MSEI has Sebi permission to offer equity, equity derivatives, currency derivatives (including interest rate futures) and debt. Every exchange requires what's known as a segment approval from Sebi to offer products to investors and traders.
Other shareholders of MSEI include 10 trading member banks, which held a combined 10.49% as of 31 March 2025. These include Union Bank of India, State Bank of India, Bank of Baroda, HDFC Bank and Axis Bank. Other well-known shareholders include commodity derivatives bourse MCX (5.53%) and co-founder of Enam Holdings Nemish Shah (1.62%).
Read more: Only one in five derivative participants trades solely in F&O
The bourse offers trading in currency futures, where it had a turnover of ₹2,260 crore against NSE's ₹74328 crore last month, according to Sebi data. There was no trading in equity, equity derivatives and interest derivatives.
Shares of MSEI in the unlisted market soared from around ₹2 apiece prior to the stake purchase by the four investors in December to as much as ₹14 in the following weeks before cooling to around ₹8-8.50 currently, according to Narinder Wadhwa, co-founder of SKI Capital Services Ltd.