In an interview with CNBC-TV18, Ramamurthy also discussed the impact of the Bankex shift to monthly expiry, BSE’s plans to deepen derivatives participation, targets for increasing broker and foreign portfolio investor (FPI) memberships, and strategies to expand the exchange’s presence in the cash equities segment.
India’s oldest exchange BSE Ltd on August 7 reported a 103.4% year-on-year (YoY) spike in net profit at ₹539 crore for the April-June 2025 quarter of the fiscal year 2025-26 (FY26), up from ₹265 crore last year.
The current market capitalisation of the company stands at ₹97,182 crore.
These are edited excerpts of the interview.
Q: Investors are taking faith, and they want to believe that the worst of this policy action is over. However, we know that there is still a lot in the air in terms of looking at maybe moving the weekly product to a fortnightly product. I’m talking about the index expiry, options expiry. So tell us where you stand as of now with the sequential improvement, and if indeed we go to a fortnightly expiry, then would that be disruptive for the business and volumes?
A: As far as the regulatory policies in India are concerned, it has been a continuously evolving process. It is a co-created process with proper consultation across market participants. The objective is common. The objective is investor protection. So, policies have been coming and evolving, and will continue to evolve. As far as the weekly expiry versus fortnightly expiry is concerned, the SEBI chair has already clarified on this matter. So, any question on this and any reply to it will be extremely speculative – an answer to a speculative question.
Q: No, sir, I’m not at all asking you to predict what SEBI will do or will not do. We also did a story. Our colleagues had some input on why this is being considered – the move from weekly to fortnightly. We’re just trying to understand that if such a shift does happen, what will be the impact? It may not happen, that’s fine. But as the business stands right now, will it simply halve the volume if it’s fortnightly, or will it not impact the volume because people will simply trade that much more, maybe not every week? They’ll trade that much every once in two weeks. So, just from a structural perspective, what could the implications be?
A: The starting point is still a speculative situation — that “if” it happens. So we have to deal with it as and when it happens. If it happens, what we all know is that whatever is good in the interest of the market is what the regulators will do. Therefore, we need to wait for what the regulatory thought process is, more so because the regulators have clarified. Any reply by me now would be based on a speculative thought process.
Q: The last time we spoke, we asked you whether the regulator asked for any information about trades by entities like Jane Street, etc. You said, “Well, you should ask the regulator.” In early July, we got the order, as far as Jane is concerned, from the regulator. But you can’t talk about what we don’t know.
A: The order indicates my stand. I gave a reply as well to that question, although what I said was something slightly different. I told you that conversations that happen between the regulator and the regulated are confidential. Notwithstanding that, at this point of time, there is no investigation on BSE is what I have stated. The order stands as testimony to what I stated.
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Q: You recently told us that you’re increasing penetration with brokers. That is a big area of effort getting more players on board on the BSE platform, making their life easier, so you can trade, etc. And it’s true. Since the first round of these options derivative market reforms happened late last year, it should have hurt, but you’ve gained. BSE has gained market share since then. You’re at about 25% of the market. What is your assessment, notwithstanding what may come from the regulator, in terms of market share, that BSE will continue to grow? Any target in mind with regards to market share?
A: There are three targets that we have. All of them may result in good market share, but market share in itself is not at all the target.
The first target is deepening and broadening of markets, which is very important for us. What I mean by that is that we today do not have as many participants as we would like to have. We started with zero. Today, we have around 500 members. We feel we should increase this number to 800 members in the derivative segment. We started with almost zero FPIs. Today, we have around 330–340 FPIs. We are targeting at least 500 FPIs to come into India to trade with BSE. They are already in India, but they are not with BSE.
Also, in terms of products, we feel that there should be more monthly contracts, next-week and next-to-next-week options, next month, long-term contracts, and futures. They all should be in place. So, this is what we call the deepening and broadening of markets. The next goal is serving the economic purpose of a product. The purpose of the product should not be just to make people trade on expiry day. It should be about a long-term view on the market and how to ensure that it helps in hedging or arbitrage, and in bringing a level playing field between the two segments. That is the second goal.
The third is customer delight – what we can do in terms of products, services, and features to ensure that the people who are not there feel that they should come to BSE, and people who are already in BSE find it more meaningful to continue to stay with BSE. These are the three goals. These are the basis on which we are working.
Every one of our actions can be linked to any one of these objectives. Will this increase market share? It may be, because it is a catch-up game. We were zero. We had no product. Today we have a product. So, the product starts growing slowly. When it grows, when you are comparing it with the market share, it happens as an increase. As I told you, it is incorrect because every product is 100% market share. You cannot take two different products, put them as a common denominator, and consider a market share. Nevertheless, since most people talk about market share, this is our path.
Q: Let’s talk about some things that are in your hands, like the clearing costs. Now, a higher proportion of trades are being cleared by ICCL, which in turn is reducing your clearing costs. So could you tell us, as a percentage, what it is at and is there further scope for reduction?
A: I do not know what the percentage is – the Clearing Corporation will know, because it is they who are appointing clearing members, and it is an independent entity with its own board, so I would not know what percentage of market share they have.
But our efforts have been to help them by putting a system in place, which is capable of surviving, growing, and sustaining itself. I am not sure whether you are aware, but when I joined, my Clearing Corporation had a capability to trade just 50 trades per second per broker. Today, we have significantly enhanced it beyond 50 trades per second per broker. If I had to introduce derivatives, then no member who was already even associated with ICCL, even though it was their time, would have been able to clear any trades. We have now increased our clearing capability.
Today, on a rough basis, we can consistently manage 13,500 trades per second per broker throughout the day, and for longer bouts, about 25,000 trades per second per broker without any latency. A peak of around 72,500 trades per second per broker with a latency of around a second is possible. That is the system enhancement we have done. Any system enhancement of ICCL as a person who has been in the market for a long time, I would certainly like to guide them and do whatever best I can. Market share and all that are things that the entity will look at.Q: Because you’re focused on the clearing cost, sir, that’s why I asked you about that. Because now I think the clearing cost would be as much as the NSE. I’m guessing, because it’s come down drastically, isn’t it?
A: I wouldn’t know, but what I can certainly say is that their capacity has significantly gone up.
Q: Let’s focus on the SGF contribution. In quarter one, there was no contribution, but various brokerage notes are assuming 5-6% of the transaction value this year. Would that be a fair estimate?
A: That is a fair estimate that the brokers are doing based on what has been the past. We have done an exercise where we have seen that the complex algorithm of computing SGF is different. It is there in its place. Notwithstanding that, for an organisation, if it has to avoid jolts of sudden debits to P&L, how should it go about it? So when we make a rough estimate, we find that around 5-6% is what gets into it. We may find a mechanism to periodically contribute to the SGF so that it is not all concentrated in a single quarter and does not give a very different impression about that quarter alone. The work is in the offing. We are taking approvals, and then we will be doing the needful.
Q: That brings me to where the operations have now stabilised with all the changes. Now we’re down to the one-product-per-week expiry format, at least as of now. So if you could tell us what that has meant in terms of volumes – I mean overall traction in Sensex volumes – and Bankex, because it’s not a weekly product anymore. Are you still seeing some buildup? What is your assessment there? And then, overall margins, because with all of this finally stabilising, and the SGF, the settlement guarantee fund, those costs being where they are, you’ve come back to a 65% margin. Is there scope for improvement?
A: As far as Bankex is concerned, you made a very important point. When it was a weekly product, it was seeing a lot of volume, and as a monthly product, it is not seeing as much volume, and volumes have dwindled. What we find is that there is interest in Bankex in the expiring week.
Currently, the preference is towards a weekly expiry type of Bankex, which is exactly what we want to change. We feel that there is a lot of merit in market participants looking at a slightly longer time horizon to trade this product. If we look at the Indian derivatives history, we started with monthly contracts, and suddenly, some of the focus has become short-term across the globe, and in some of the developed markets, more than 60% of their volume is traded on the expiry day as zero-DTE.
As market participants, we have a responsibility to go back to the market participants and bring out the importance of using a monthly product as intended, which is exactly what we are doing. We are planning to do more to help change the mix, bring more institutional participation, and therefore serve a better economic purpose through derivatives. That work is on, and we will do it.
As far as the margin is concerned, we are not looking at increasing or stabilising the margin. Instead, our focus has been on diversification of our revenue streams. What we would like to have is more cash-equities volume, because we are not growing greatly there. Our market share has not been significant there. I would certainly talk about market share because the products are the same there. Our market share has been small. I have always thought that if our market share goes up there, it will not be a cannibalisation of the other exchange, but a growth in the entire market pie. I have been proved right – when I went up from 5% to 7-8%, the market size in itself grew, which I feel strongly about because of multiple economic reasons, which I can elaborate on if you were to ask me a question there.
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Q: If you could give us some sort of an aspirational path on both these fronts – market share, your aspirational market share, and what inroads you think you can make in the next one year on the cash equity side, and also in the Bankex, where the volumes are right now languishing – what kind of monthly volumes would you aim for by the end of this year, as your conversations with market participants start bearing fruit?
A: In terms of Bankex, I will not give any volume target, because that has not been our approach. In terms of cash equities, we want to have consistent double-digit volumes. At least it should be 12%, 15%, or 20%. I’m not aspiring for a 50–50 split, because that would tantamount to cannibalisation. Our interest is not in cannibalisation; our interest is in growing the pie. The pie will grow very large. Why do we feel that? Because if we are talking about a 50 trillion market capitalisation by 2047 under a 30 trillion gross domestic product (GDP), it cannot be just these 5,500 companies listed at BSE. It has to be more companies coming in. Are we saying that these 5,500 companies will have such a valuation that they, from 5 trillion, will go to 50 trillion? That cannot be so.
Q: We’re jumping in and interrupting you. On the derivative side, and without going into what the regulator may say or not do, do you believe – and the concern has been – that the volume of derivatives here in India relative to the cash market has been disproportionate compared to any other market, the US or any other market in the world? And you know the stats very well. Do you think for the foreseeable future, we’ve seen that ratio completely peak, and that the direction of travel is more towards normalisation? Would you agree with that statement?
A: Unfortunately, I’m not in a position to agree with you, and I have been telling this multiple times in the marketplace. And we are talking about the US, and you’re telling me about the cash-to-derivatives volumes. In the US, there are multiple exchanges, multiple dark pools, and multiple trading platforms. All of those volumes are never measured. Neither the denominator nor the numerator is fully accounted for. There are OTC products, and there is internalisation. Neither the denominator nor the numerator is known.
Q: But, even if you add all the dark pools, etc., I’m not advocating for one or the other.
A: You may have the data. I don’t have the data. The US does not publish any such data.
Q: You wouldn’t say that the ratio has peaked. You would not say that, right?
A: What I am not able to measure based on a speculative thought process it is that I will not be able to do anything. I’m only saying that with a lot of dark pools and platforms, the numerator and denominator are not known in the US. How do I compare with it?
What is visible to me is the option premium traded in India and the cash market volumes. If I were to compare that in India, it is a fraction of the total cash market volumes. What is visible to me is the number of investors in the derivatives market versus those in the cash market. That is a smaller volume. Is it true that retail investors are losing money? Honestly, yes. Does that mean the options have peaked out? Very difficult to say. No, the parameters do not indicate that. So, it will not be possible for us to conclude that, compared to the US, we are doing more or that we have a skewed ratio because of the points I explained. Secondly, based on the Indian data, which is very clearly visible, we are not able to conclude that we have peaked out on volumes.
Q: Getting ready for the NSE listing?
A: No. This question has been asked of me by CNBC-TV18 in the last three interviews. I have always told them it will be a matter of great pride for me because I was one of the people who joined NSE in the initial days. It will be a matter of pride. NSE is a prestigious institution, and to have it listed would be a matter of pride. And BSE will feel honoured, naturally.
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