India’s Derivatives Moment: Scale, Reform, and the Race for Speed

Since 2023, India has vaulted into the top tier of global equity ecosystems, both in terms of depth and velocity. India’s exchanges now routinely dominate global exchange-traded derivatives volumes, a surge powered by short-dated index options that turned weekly expiries into a national habit and pushed contracts traded into the tens of billions per quarter. The boom peaked in the second quarter of 2024, when more than 36.8 billion equity index options changed hands on the two main venues, National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), more than double the level a year earlier and accounting for over two-thirds of all futures and options traded worldwide.

Regulators took notice and began to address the most volatile aspects of the market. In July 2024, the market supervisor proposed a higher minimum contract size, limiting each exchange to a single weekly index expiry, widening strike intervals, tightening upfront premium collection, and introducing steeper near-expiry margins. The package was designed to curb retail-driven excess without impairing institutional liquidity. These proposals were followed in 2025 by draft rules that would confine expiries to specific weekdays and extend certain single-stock option tenors, as further steps aimed at reducing expiry-day instability while preserving the institutional core of the market.

India is moving quickly toward faster settlement. After years of shortening settlement cycles, the country has introduced optional T+0, where trades can settle the same day instead of the next day. Exchanges began testing this in early 2024, and regulators expanded it later in the year, with a broader rollout in 2025. India currently has two parallel settlement tracks: traditional T+1 and optional T+0.

For trading firms, this created a new kind of speed competition outside the exchange’s matching engine. Under T+1, firms have a full day to move cash and collateral around, so funding and clearing become routine operational tasks. Under T+0, those processes become time-critical. Firms need to manage capital, collateral, and clearing workflows much more actively because the timing of those flows can directly affect the ability to trade. In other words, settlement operations become part of a firm’s competitive edge, not just back-office mechanics.

Capital performance and the macro frame

Market structure only matters if the macro can carry it, and here too, India has been an outlier. In January 2024, India overtook Hong Kong to become the world’s fourth-largest equity market, with a capitalisation of around $4.3 trillion. By mid-2024, the combined market cap pushed through $5 trillion and has largely held there, supported by steady primary issuance and a deep domestic savings pool. Most forecasts published in 2025 place real GDP growth in the mid-6% range, the fastest among major economies, with inflation easing and policy rates broadly stable. The central bank’s projections for FY26 hover near 6.8% growth with softer inflation, while multilateral institutions cluster between 6.2% and 6.7% for 2025-26.

The challenge is on the flows side. Market capitalisation continues to rise even as net foreign direct investment weakened through FY25 and foreign portfolio flows turned volatile in early 2025. That disconnect reflects how much domestic investors now drive the market. Mutual funds, insurers, and pension allocations have become large and steady enough to offset foreign selling, reducing the market’s sensitivity to swings in global risk sentiment.

The new war for quants

Volumes and volatility attract talent. Over the last two placement seasons, India’s premier engineering campuses have reported a pronounced shift toward quantitative trading and research roles, with domestic firms stepping up compensation and, in some cases, matching or beating international offers—a reversal of a decade-old pattern. Reports from late-2024 into 2025 describe seven-figure USD-equivalent packages at the top decile for India-based roles and a broadening of recruiting beyond a small group of marquee firms to a wider bench of systematic managers, market makers, and options specialists.

The punchline is not the headline numbers; it’s the capacity shift. India has become the world’s densest market for early-career quantitative talent that can be hired and deployed in-country and then scaled globally. That trend is reinforced by the expansion of global capability centres, R&D and trading-adjacent analytics hubs, for multinational financial institutions, which creates a secondary market of machine-learning engineers and low-latency systems developers. The result is a tighter labour market and a steadily rising floor for pay in strategy research, execution engineering, and production operations.

Connectivity and market infrastructure: where edges now come from

For prop shops, alpha increasingly starts with wires and racks. India’s main exchange co-location facilities, standardised racks with strict power envelopes and tick-by-tick multicast feeds, remain the only viable home for consistent sub-millisecond performance. The constraints are both practical (rack KVA limits, thermal management) and policy-driven (order-to-trade ratio regimes, throttles, and admission protocols). The watchwords are discipline and engineering, not just strategy.

Past the co-location layer, the clearing stack is becoming a parameter to optimise as optional T+0 interacts with margining. Firms that can dynamically route between T+1 and T+0, price funding accurately, and manage inventory at the clearing-member level can uncover basis-like returns that were not available when settlement operated on a single timeline. The build-sheet is familiar, co-location space, direct feeds, disciplined OTR, robust throttling, and software that degrades gracefully during expiry-day stress, but the payoff is larger in a market whose microstructure now demands it.

A second infrastructure vector sits offshore, but “in India.” The 2023 migration of USD-denominated Nifty derivatives from Singapore to Gujarat’s International Financial Services Centre (GIFT City) completed a long-running policy push to onshore liquidity while preserving a globally familiar contract structure. Since then, the Connect linking Singapore members to the IFSC venue has operated at scale, and the rulebook in the zone has been shaped to remain legible to global proprietary participants. In 2024 the unified financial authority introduced remote proprietary trading access, allowing foreign entities to trade IFSC products without a physical presence, widening the channel for offshore capital and technology.

Will Western prop firms trade “onshore” India?

The past two years have produced two answers. In the mainland market, higher compliance demands, rationalised expiries, and a broader push toward safer retail participation have nudged some cross-border players to focus more on research and engineering footprints in Indian cities while executing either as domestic members or through local partners. At the same time, the IFSC has become a pressure-release valve: its dollar-denominated contracts, tax profile, and the ability to access the venue as a remote proprietary participant are explicitly designed to attract sophisticated foreign flow.

That policy asymmetry shows up in the product calendar as well. While domestic regulators have moved to consolidate weekly expiries, IFSC venues are expanding their short-dated offerings for international participants. The directional bet is that India can protect households at home and still draw regional trading liquidity away from legacy offshore hubs, using the same geography to serve both goals.

What this means for prop and systematic shops

The investible truth of 2023–2025 is that India is no longer just “the next big market”; it is already the world’s most energetic listed-derivatives venue, with a regulator actively reshaping behaviour and an infrastructure stack that rewards mastery of microstructure. The macro backdrop carries the story, mid-6% growth, market cap above $5 trillion, and primary issuance pipelines that keep breadth healthy, but the edge is micro: rack allocation and power budgets in co-location; deterministic feed handling on heavy expiry days; dynamic selection between T+1 and T+0 to minimize slippage and funding drags; and recruitment engines that can win the IIT/IIIT/ISI talent tournament without diluting mentorship and production quality.

Shops that default to mainland cash-equity and index-options exposure should now think in terms of a twin-hub architecture: domestic co-location for rupee risk and microstructure alpha, and IFSC connectivity for dollar risk, 24-hour coverage, and policy diversification. The tactical choices, expiry-day positioning under a single-weekly regime, laddered strike selection under wider intervals, and managing new margin waterfalls, will continue to evolve, but the strategic direction is set. India has built a derivatives market that is both larger and better supervised, and it is inviting global capital to participate on onshore terms that no longer look like a compromise.