The National Stock Exchange recently announced that it will be shifting the F&O settlement of all contracts to Monday starting April 4. In a circular, the NSE stated that various contracts including Nifty weekly, monthly, quarterly and half-yearly contracts, Bank Nifty monthly and quarterly contracts, as well as Fin Nifty, MidCap Nifty, and Nifty Next 50 monthly contracts, will now expire on Monday. Additionally, all single-stock futures will also expire on Monday. The revised expiry date of all existing derivatives contracts will be available in the contract file generated on April 3 to avoid operational complexities.
Exchanges have been making frequent changes to the settlement cycle of F&O contracts. For example, the BSE changed the expiry days of all contracts from Friday to Monday. Similarly, the BSE had previously changed the weekly expiry of contracts to Monday from Thursday in its equity derivatives segment. The Nifty Financial had its expiry on Tuesday and the Nifty Midcap Select on Wednesday.
Following the discontinuation of weekly contracts for Nifty Bank, FinNifty, Nifty Midcap Select, and Nifty Next50, the NSE has revised the monthly expiry days of these four F&O contracts to Thursday, effective January 1, 2025.
The move to shift the settlement day may be NSE’s attempt to maintain its dominant market share in a segment where BSE is making efforts to gain ground. The derivatives market has seen significant growth, with turnover increasing from ₹33 lakh crore in 2016-17 to nearly ₹600 lakh crore in 2024-25 on the NSE.
When F&O was introduced in 2000, there was no rolling settlement for cash market. The BSE had its settlement cycle from Monday to Friday and the NSE had trades settled every Tuesday. Thursdays were chosen as the expiry day to avoid excessive volatility and reduce systemic and default risks.
With the introduction of rolling settlement cycle, shifting the expiry day should not pose a problem for traders. However, unexpected market events during the weekend ahead of Monday expiry may catch traders off-guard. It will be interesting to see how BSE responds to NSE’s recent change in derivatives expiry day.
In conclusion, the frequent changes in F&O expiry dates may impact trader sentiment, but only time will tell the impact of NSE’s decision. The F&O space is poised for interesting developments in the future.
