Derivatives contracts expiry days now limited to Tuesdays or Thursdays

The move aims to reduce market volatility and concentration risk on expiry days by allowing exchanges to offer index derivatives only on Tuesdays or Thursdays

The Securities and Exchange Board of India (Sebi) on Monday announced it will limit the expiries of all equity derivatives contracts to two days per week, either Tuesdays or Thursdays starting next month.

 

This move is aimed at curbing hyper-activity on expiry days and reducing concentration risk in the market.

 

In March, Sebi had proposed these changes following instances of frequent switches by exchanges on expiry days.

 

The regulator believes that spacing out expiry days throughout the week will provide an opportunity for stock exchanges to offer product differentiation to market participants.

 

As per Sebi’s circular issued on Monday, every exchange will be allowed to retain one weekly benchmark index options contract on their chosen day (either Tuesday or Thursday). However, exchanges must now seek prior approval from the regulator to modify the settlement day of their derivatives contracts. Sebi has asked stock exchanges to submit their proposals by June 15.   

 

Apart from benchmark index options contracts, all other equity derivatives contracts will have a minimum tenor of one month, with expiries occurring in the last week of every month on the chosen day by the exchange.

 

In response to Sebi’s proposal, the National Stock Exchange (NSE) had initially shelved its plan to move expiries to Mondays. However, the exchange has now sought approval from Sebi to shift expiries to Tuesdays. Currently, NSE contracts expire on Thursdays, while BSE contracts expire on Tuesdays.

 

If Sebi grants approval to NSE to shift the expiry day to Tuesdays, BSE could find it challenging retaining market share. NSE’s revenue from transaction charges in Q4FY25 declined by 15 per cent quarter-on-quarter due to a reduction in volumes across the cash market and derivatives segment.

 

The exchange attributed this decline to regulatory changes that limited expiries to one benchmark per exchange. NSE’s management has stated that they do not expect any further loss of market share in the derivatives segment to BSE.

 

Sebi’s circular will also hurt exchanges such as Metropolitan Stock Exchange of India (MSE) which was planning to roll out index derivatives with an expiry day unique to it.