NSE changes Nifty Bank F&O expiry to Friday: What does it mean for BSE?

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The National Stock Exchange has changed the expiry for Bank Nifty Futures and Options (F&O) to Friday instead of Thursday, effective July 7, 2023.

“The change shall be effective from trade date July 7, 2023 Friday and accordingly, all existing contracts with Thursday expiry will be revised to Friday on July 6, 2023 end of day. The first Friday expiry will be on July 14, 2023,” the NSE circular to members said.

With this change, NSE will now have an F&O expiry on every day of the week barring Monday, with effect from the week starting July 9.

There is the Nifty Financial expiry on Tuesday, Nifty Midcap Select on Wednesday, Nifty 50 on Thursday and now Bank Nifty on Friday.

Nifty Financial initially had a Thursday expiry, but that was later changed to Tuesday, ostensibly to ensure that traders interest was not spread thin across three contracts in a single day. The shift worked well for NSE with trading volumes in Nifty Financial soaring.

"This move is more significant than any of the other similar changes with respect to expiry days brought in for FinNifty or that of BSE indices etc, as Nifty and Bank Nifty constitute the lion's share of derivative volume," Anand James, Chief Market Strategist at Geojit Financial Services said.

"Once expiry days become different, it is possible that the link between Nifty 50 and Bank Nifty might diminish," he added.

Impact on BSE

NSE’s latest move will be a blow to BSE’s recently launched weekly options contracts in the Sensex and Bankex contracts, which have a Friday expiry. In fact, BSE had chosen Friday as the expiry to ensure that it did not clash with NSE’s F&O contracts expiry.

"BSE F&O contracts, which already expire on Friday, have gained popularity among traders due to lower charges compared to NSE. To counter this competition, NSE introduced the idea of shifting the expiry day," Santosh Meena, Head of Research, Swastika Investmart said.

The recently relaunched S&P BSE Sensex derivatives contracts' turnover hit a high of Rs 69,422 crore – Rs 69,287 crore in options and Rs 135 crore in futures – on its third weekly expiry last week. This was four times the turnover of the previous expiry.

A derivative trader who recently started trading in Sensex contracts said this move will be the nip in the bud for Sensex and Bankex contracts as the volume will shift to Bank Nifty now.

Since both Sensex and Bank Nifty contracts expire on Friday now, those traders who trade with limited capital will definitely trade Bank Nifty, another trader said.

The NSE's move came despite Sundararaman Ramamurthy, MD & CEO, BSE Limited, said in an interview last month that BSE was not seeing itself as a competition to the NSE, rather just a contributor to the futures and options ecosystem.

“(BSE is) really too small (in F&O segment) for anybody to consider as a competitor. My game is not to be a competitor and take away market share. I am trying to make BSE more vibrant,” said Ramamurthy.

NSE definitely didn't seem convinced by this argument.

"I support the new process of expanding trading hours and moving the expiry of F&O contracts to Friday. It will provide customers with more time to trade, assess market conditions, and manage risks effectively before the expiry," said Sarvjeet Virk, Co-founder & MD, Finvasia.