The National Stock Exchange of India Ltd has made an unexpected change by moving the expiration day for its listed equity derivatives from Thursdays to Mondays. According to an exchange circular released late Tuesday, starting April 4, all monthly, quarterly, and semi-annual futures and options on indexes and stocks will now expire after the market close on the last Monday of the expiry month. Additionally, weekly contracts on the benchmark NSE Nifty 50 Index will mature on the Monday of the expiry week.
Deven Choksey, managing director at DRChoksey FinServ Pvt., has raised concerns about the potential risks that traders may face with this change. He highlighted that the Monday expiry could lead to significant weekend carry over risk for traders, especially as stock derivatives are physically settled. A sharp move based on weekend news could make it challenging for traders to deliver shares against outstanding positions.
This change by the NSE comes after the bourse announced in November that it would move the expiry day of several index derivatives to Thursdays. This was done to align with the day for the most-traded contracts on Nifty indexes. The move by NSE also seems to be in response to BSE Ltd.’s decision to streamline all of its derivatives expiries to Tuesdays, including the weekly S&P BSE Sensex Index options that previously matured on Fridays.
Abhilash Pagaria, head of alternative and quantitative research at Nuvama Institutional Equities, suggests that NSE’s intention with this change may be to stay ahead of BSE’s expiry. The fear of dwindling volumes at BSE due to NSE’s move caused BSE’s shares to decline by as much as 9.4% to their lowest level in more than four months.
This announcement by NSE comes shortly after Tuhin Kanta Pandey took over as the new chief of the Securities and Exchange Board of India. His predecessor, Madhabi Puri Buch, had implemented strict measures to curb the rapid growth in derivatives trading. These measures included reducing the number of weekly options available and increasing minimum contract sizes. As a result, NSE had to stop offering investors’ favorite contracts, such as weeklies tracking the NSE Nifty Bank Index. This led to BSE gaining ground, with its notional turnover rising to around 55% of NSE’s in February, up from 30% before the curbs began in October.
Overall, the changes in expiry days for equity derivatives at NSE and BSE reflect the competitive landscape in India’s stock market, with exchanges making strategic moves to attract traders and maintain market share.
