Sebi plans to restrict derivative expiries, affecting NSE’s Monday shift

The Securities and Exchange Board of India (Sebi) has proposed restricting the expiry of derivative contracts to either Tuesdays or Thursdays, a move that could disrupt the National Stock Exchange’s (NSE) recent decision to shift its weekly index option expiry to Monday.

According to a consultation paper released on Thursday, Sebi aims to minimize concentration risk and enhance product differentiation by standardizing expiry days across exchanges. The proposal seeks to formalize settlement days and prevent frequent adjustments.

"Each exchange will be permitted one weekly benchmark index options contract, which must expire on either Tuesday or Thursday," the consultation paper stated.

Impact on NSE’s Weekly Expiry

Currently, as per Sebi’s circular dated October 1, BSE Ltd has designated Tuesdays, while NSE has set Thursdays as the expiry days for single stock and index options. However, NSE’s decision to shift its weekly expiry to Monday, effective April 4, has prompted Sebi to intervene. The regulator believes that multiple expiry days could lead to excessive market activity and volatility.

To ensure stability, Sebi has mandated that exchanges obtain prior approval before introducing or modifying contract expiry or settlement days.

Changes in Equity Derivative Contracts

In addition to the expiry day restrictions, Sebi has proposed that other equity derivative contracts, including benchmark index futures, non-benchmark index futures/options, and single stock futures/options, must have a minimum tenure of one month. These contracts will now expire in the last week of the month on the designated Tuesday or Thursday of the respective exchange.

This move is expected to streamline derivative trading and create a more structured approach to contract settlements, reducing market disruptions caused by frequent changes in expiry schedules.