BSE stock rises as mkt regulator Sebi works out solution to expiry-day woes

Measures proposed seen benefiting BSE; NSE halts plan to shift expiry

Shares of BSE surged 16 per cent — the best single day gain in nearly six months — as the move by the Securities and Exchange Board of India (Sebi) limiting derivatives expiries to just two days of the week was seen benefitting the bourse.

 

After Sebi’s proposal, the National Stock Exchange (NSE) deferred its decision to shift expiry of index derivatives contracts to Monday from Thursday. The shift was to come into effect from April 4.

 

Shares of BSE closed at ₹5,438 apiece on Friday, helping it recover from the six-month lows with analysts scaling back its earnings estimates due to NSE’s shift.

 

“Over the last two months, BSE has gained substantial market share. The volume gain by BSE has been more organic with many participants inclined for the Sensex contracts. NSE had an advantage with multiple expiries in the week. However, now more brokers are also coming on BSE. We also expect more high frequency traders coming on BSE in future as it develops its infrastructure and technology,” said Amit Chandra of HDFC Securities.

 

Brokerages shared that BSE’s market share has jumped from 13 per cent to 19 per cent quarter on quarter (Q-o-Q) while the volume in options premium has surged 30 per cent Q-o-Q. 

 

On Thursday, Sebi proposed to limit equity derivatives expiries to either Tuesdays or Thursday for each exchange. BSE and NSE will have to opt for either of these days.

 

At present, single stock and index derivatives contracts of BSE expire on Tuesdays while the same on NSE are scheduled on Thursdays.

 

The exchanges may also be mandated to seek approval from the market regulator to modify any contract expiry or settlement day. The lack of this had led to the exchanges shifting expiry day to their choice multiple times in the last one year.

 

Sebi’s proposal comes amid a surge in derivatives trading volumes, particularly in index options on expiry days. The move follows concerns over concentration risk and market integrity.

 

Following concerns, Sebi had stepped in to limit one weekly index expiry per exchange, reducing the earlier trend of multiple index option contracts expiries through the week.

 

Market experts said that a uniform expiry day across the market would have stressed the systems of market infrastructure institutions and brokers due to concentrated volumes. It could also intensify competition between the exchanges.

 

Sebi’s move is also expected to queer the pitch for new derivatives aspirants such as National Commodity & Derivatives Exchange (NCDEX) and Metropolitan Stock Exchange (MSE).

 

Sources said that Sebi has been sounding off these exchanges to have a diversified business plan and not just rely on launching weekly index options.