After relaunching Sensex derivatives three years ago, BSE Managing Director and CEO Sundararaman Ramamurthy is now trying to deepen the market by wooing options traders away from near-term expiries and encouraging the use of longer-dated products, which the exchange believes offer better hedging and greater market stability.
In an exclusive interview with ET Markets, Ramamurthy outlined an ambitious three-year plan to increase participation from the current week's expiry to monthly and even further-dated contracts. The goal, he says, isn't just about growing volumes but about building a market that can actually absorb stress.
"If people are hedged three months out, there is less panic during global events," Ramamurthy said. "That is the goal for the next three years."
Look beyond the weekly expiry
BSE's strategic pivot comes at a critical juncture. Three years after re-entering the derivatives space, the exchange has established a level playing field. Now, the challenge is to deepen it.
India's options market, dominated by weekly expiries, functions largely as a theta play — a bet on time decay rather than a genuine expression of directional or volatility views. That, he argues, makes it incomplete.
"When an option is short-term, it is more of a theta play. When it is longer-term, it becomes a delta, gamma, and vega play. That's when the market is truly complete — when it reflects all aspects of variation and trade."
He also made a pointed argument to retail traders who gravitate toward weekly options for their apparent cheapness: "A four-week option is not four times the weekly option premium. If you have a directional view but take a weekly option thinking it's cheap, your view may ultimately be right in the second or third week — but the option has already expired and your money is gone."
The ambition is to eventually have simultaneous liquidity across July, August, and September when traders are still in June — a transformation he described as "a trickle becoming an avalanche."
Also Read | 3 years of derivatives relaunch: How Sensex turned Rs 2 crore premium into Rs 33,000 crore options business
BSE’s new products
BSE’s Bankex monthly expiry contracts are gaining ground, and its newly introduced Focused IT index, launched amid elevated volatility in the technology sector, is showing early promise as a hedging vehicle.
"In a month, a lot can change. It makes for a very effective hedging tool. If someone is holding a portfolio of IT stocks and volatility is high, a monthly IT index product gives them meaningful cover," Ramamurthy said.
To drive adoption, BSE has conducted over 200 educational sessions across more than 20 cities, targeting dealers — the individuals within brokerages who actually execute trades and determine product selection.
In an unusually candid admission for an exchange CEO, Ramamurthy said BSE's outreach is not purely self-promotional: "We are not purely promoting BSE products. We are telling people that whichever exchange's monthly products they use, they should be using monthly products. As an Indian citizen, I want monthly products to become a much bigger part of the market overall."
The institutional gap which BSE wants to address
Perhaps the most significant challenge Ramamurthy flagged is one the BSE has not yet solved: building a product that works for institutional and foreign participants.
Large funds, he noted, often hold portfolios with only 60–70% correlation to benchmark indices like Nifty or Sensex. A broad index hedge, then, is an imperfect tool as it leaves a meaningful portion of their risk uncovered.
"What product could help an institution hedge more precisely, on a monthly basis, with meaningful correlation to their actual portfolio? That question lingers in my mind."
The structural difficulty, he acknowledged, is that institutional products require speculative participation to generate the liquidity that makes them functional as institutions alone cannot sustain a market. Designing something that serves hedging needs while remaining attractive to other participants is a problem, he says, he has not yet cracked.
"I need to go back to the drawing board, and more importantly, go back to the voice of the customer."
BSE is also planning to launch derivatives on Focused Midcap and Sensex Next 30 indices, though Ramamurthy declined to commit to a timeline, citing continued global uncertainty.
"Today there appears to be a truce; tomorrow that may change," he said.
