BSE to tweak F&O contracts to improve liquidity

In a bid to create more volumes by increasing arbitrage opportunities, the Bombay Stock Exchange (BSE) has revamped its derivatives segment by changing the expiry cycle of futures and options (F&O).

In response to inputs from market players and to improve liquidity in the F&O segment, the exchange has decided to change the expiry day of all monthly index futures and options from last Thursday of the month to the third-last Thursday of the month. Also, the expiry cycle of all weekly options contracts will be changed from Monday-Friday to Friday-Thursday. This mease the expiry will be on Thursday instead of Friday.

A BSE spokes person told Business Standard that this was one of the many steps being contemplated to improve liquidity in the exchange’s derivative segment. The BSE has futures trading in Sensex, Mini Sensex, BSE TECK, BSE Oil & Gas and BSE Bankex and options contracts in Sensex, Mini Sensex, RIL, SBI and TISCO.

The new cycle is expected to give a longer life to contracts. BSE is also introducing fortnightly contracts from next month.

“The BSE need to focus on bringing liquidity to the futures segment, which will also benefit the options segment,” said Sidharth Bhamre, head of derivatives at Angel Broking.

Trading in share options in the derivatives segment has been rising consistently.