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MUMBAI: Trading in index options on the National Stock Exchange (NSE) has surged this month, driven by heightened market volatility linked to the West Asia conflict. Average daily turnover (ADT) in Nifty and Bank Nifty contracts is on track to hit a record, even as curbs by the markets regulator on retail trading remain in place.

Rival BSE has also seen turnover climb in Sensex options, but the NSE has accounted for a larger part of the incremental volume, potentially ending the cycle of market share erosion to BSE in index options after November 2024.

Individual and proprietary traders—brokers trading for themselves—dominate the NSE’s options market. BSE does not provide similar segregation.

NSE’s premium-based ADT in the first 12 sessions of March jumped to a record ₹83,029 crore, up nearly 36% from February’s ₹61,141 crore, which itself was a 16-month high, according to NSE data.

“This month could witness highest-ever ADT for NSE, thanks to a surge in volatility because of the rising geopolitical tensions,” said Amit Chandra, vice-president, research, at HDFC Securities.

The previous record monthly ADT for NSE was ₹71,690 crore in February 2024. With seven sessions remaining this month, sustained trading amid elevated volatility could push the exchange ADT to a new high and potentially boost market share, said Kruti Shah, quant analyst at Equirus Securities.

The spike in turnover is mirrored in the ratio of premium to notional turnover on NSE, HDFC Securities' Chandra said. Notional turnover measures the total value of the underlying contract, while premium turnover reflects the actual price of the option.

In March, NSE’s notional turnover was 345 times its premium turnover, down from 463 times in February. On BSE, the ratio fell to 638 from 882.

“This shows that while notional turnover has not risen much the premium turnover has, because of the spike in implied volatility,” said Chandra.

Month-on-month, NSE’s ADT growth of 35.8% outpaced BSE’s 35.2%, setting the stage for a potential shift in market share dynamics for now, Chandra added.

The Securities and Exchange Board of India’s November 2024 measures—limiting weekly contracts to one per exchange, tripling contract sizes, and increasing margins on expiry day, among others—aimed to cool retail frenzy and trading losses in index options.

BSE, with its weekly Sensex contract, had gained market share in the interim, rising from 12.2% in November 2024 to 28.2% by February 2026, according to exchange data, with its share flat in the first two months of 2026.

NSE which ran more liquid weekly contracts than BSE' sole Sensex contract had to discontinue Nifty Bank, Nifty Midcap Select, and Finnifty weekly contracts, enabling BSE's Sensex options to gain traction after November 2024.

Speaking at the Q3FY26 investor call, BSE chief executive officer Ashishkumar Chauhan said, “In terms of competition taking market share, that cycle is broadly over in equity derivatives.”

Options accounted for 77% of NSE’s standalone transaction charges, which reached ₹3,006 crore in Q3FY26. Equity cash and futures and currency derivatives contributed the remainder. Transaction fees overall comprised 68% of NSE’s standalone income of ₹4,419 crore in the same quarter.

The surge in options trading coincides with NSE’s upcoming listing. Earlier this month, the exchange appointed 20 merchant bankers and eight law firms for its proposed initial public offering.

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