SEBI proposes limiting expiry days of derivatives contracts to Tuesdays or Thursdays

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The market regulator has proposed that weekly and monthly expiries of index and single-stock derivatives contracts be restricted to either Tuesdays or Thursdays, to offer predictability to investors and protect market integrity. It also also proposed that exchanges seek SEBI's approval before launching or modifying any contract expiry or settlement day.

The consultation paper issued on March 27 by the Securities and Exchange Board of India (SEBI) has suggested, "Expiries of all equity derivatives contracts of an exchange will be uniformly limited to one of either Tuesdays or Thursdays. This would provide optimal spacing between expiries across exchanges, while avoiding choice of either the first day of the week or the last day as an expiry day."

It added, "Every exchange will continue to be allowed one weekly benchmark index options contract, on their chosen day (Tuesday or Thursday)." SEBI will be accepting comments and suggestions from the public on this consultation paper till April 17.

After the regulator's October 1, 2024, directive, each exchange was allowed to have options contracts for one benchmark index with weekly expiry. BSE moved its Sensex weekly expiry from Friday to Tuesday and NSE has announced moving its Nifty weekly expiry from Thursday to Monday effective April 4.

Other contracts

The consultation paper also noted that monthly single stocks derivatives contracts on one of the exchanges expire mid month, whereas monthly index derivatives contracts on these constituents expire in the last week of the month.

SEBI has suggested, " Besides benchmark index options, all other equity derivatives contracts, viz., all benchmark index futures, non-benchmark index futures / options, and all single stock futures / options will be offered with a minimum tenor of 1 month, and the expiry will be in the last week of every month on their chosen day (that is last Tuesday or last Thursday of the month)."

Regulator's reasoning

In the consultation paper, SEBI said, "Spacing out of expiry days through the week reduces concentration risk, and provides an opportunity to exchanges to offer product differentiation to market participants. At the same time, too many expiry days has the potential to revive expiry day hyperactivity, which could jeopardize investor protection and market stability.

"It is therefore, felt desirable to formalize the final settlement days for equity derivatives contracts across exchanges so that it gives predictability to market participants while avoiding any unwarranted shuffling of such days by the exchanges that may impact market integrity or orderly trading."