Active derivatives investor base stands at 3.9mn and Individuals make up 35 per cent of option premiums in the system. However, there is a large concentration at the top. While retail investors are growing in numbers, the share of smaller retail investors in overall premiums mix is very low, the report said.

Rise of digital discount brokers is expanding active investor base NSE's active investor base has grown 4x post Covid to more than 11mn investors. Further, the number of active derivatives investors have grown 10x in this period from a low base. The drivers of this large investor onboarding have been the digital discount brokers who have managed to scale up their investor base to 5-6x that of traditional brokers in a much shorter timeframe.

Rising smartphone/internet penetration, easy eKYC through public digital infrastructure and increasing awareness about equity markets are enabling these digital players to rapidly onboard a large customer base. Digital brokers are acquiring younger client cohorts and spreading out beyond urban metro locations into tier-2/3 cities for newer customers. Top 5 digital brokers now make up 64 per cent of active NSE clients, the report said.

Sachetization of derivatives is driving up derivatives volumes. With increasing investor awareness on options and broad basing of investor base (rising retail participation) in equity markets, derivatives products with lower ticket size are seeing strong growth in large global exchanges. Another important factor has been the rise of social media led information dissemination and easy availability of app-based tools for options trading, Jefferies said.

The most popular product is index options trading on the day of expiry (0DTE options).

In US, 0DTE volumes as a per cent of total SPX volumes have increased to 50 per cent from 22 per cent in Jan-22. India has been leading this trend with 60-80 per cent of volumes taking place on expiry days for the top 3 products which control more than 90 per cent market share. In Sep-23, European bourse Eurex (owned by Deutsche Bourse) launched one-day options tied to Euro Stoxx 50.

Indian exchanges are benefiting from financialization of savings, rising equity participation (from digitization of capital markets), growth in equities, product innovations & stable fees vs. other cap. mkt. platforms. BSE can leverage macro-tailwinds along with headway into derivatives to deliver 150 per cent earnings jump in FY24E and double it over FY24-26E.