The National Stock Exchange of India adapted smoothly after the Reserve Bank of India deferred its funding circular implementation from April 1 to July 1. Even with steady trading participation, geopolitical friction and new settlement rules caused the exchange's sequential profit after tax to decline by 17% to ₹2,578 crore. Market mechanisms are shifting again as regulators temporarily revert to a volume-based settlement model on December 7. Moving forward, exchange officials anticipate consolidating their equity options market share within the 70% to 72% range.
Key points
Regulatory adjustments and West Asia geopolitical conflicts created notable quarter-on-qu…: Regulatory adjustments and West Asia geopolitical conflicts created notable quarter-on-quarter financial pressure for the exchange operator.
Market regulators agreed to suspend August closing auction rules and return to volume-bas…: Market regulators agreed to suspend August closing auction rules and return to volume-based settlement for index options on December 7.
Exchange leadership projects its domestic equity options market share will stabilize betw…: Exchange leadership projects its domestic equity options market share will stabilize between 70% and 72% over time.
Sources checked by our analysis pipeline: 1
Proprietary traders, or brokers who trade for themselves, extended their existing bank guarantees (BGs) and tapped the corporate bond market to sustain their equity market activity to cope with the Reserve Bank of India's (RBI) recent curbs on bank funding.
This prevented a striking impact on prop volumes, said Sriram Krishnan, chief business development officer of the National Stock Exchange (NSE), during the exchange’s second-quarter earnings call.
The official was responding to an analyst's query on the "tumultuous" quarter that impacted NSE's sequential earnings.
The RBI circular (on bank funding for prop traders) was scheduled to go live on 1 April this year but was deferred by three months and took effect from 1 July. Prop traders used this postponement to their advantage.
"A number of market participants, particularly brokers getting impacted potentially have extended their prevailing BGs by several months, as much as they could, and some have raised money by issuing corporate bonds in the last few months," said Krishnan in response to the analyst's query.
"I think market participants have their own way of coping with any…
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