Proprietary traders’ share of equity derivatives turnover at the National Stock Exchange of India Ltd. has fallen to 54.7% of the 193 trillion rupees ($2 trillion) in notional daily futures and options turnover in August, the lowest level since December 2022, down from about 62% in November 2024. The decline follows regulatory curbs on speculative trading and persistent issues with the closing auction mechanism launched on Aug. 3, which has struggled to attract sufficient participants, resulting in thin liquidity and amplified price swings in cash equities and derivatives. The 20-minute window and single-price mechanism have limited market-making and arbitrage opportunities.

Additional pressures include new curbs on bank funding for proprietary trading effective July, tighter central bank leverage rules, and regulatory scrutiny on weekly contracts. Hariselvan Radhakrishnan, CEO of HST Wealth, stated that “the days of prop desks dominating NSE options turnover are behind us.” Proprietary traders’ share of cash equities turnover fell 172 basis points month-on-month in August, while retail investors’ share rose 53 basis points to 33.5%. The Securities and Exchange Board of India proposed changes to the auction framework on Sept. 12, including a potential return to the prior settlement method for derivatives on expiry days, with public comments sought by Oct. 3.