Sebi proposes limiting derivative expiry to Tuesdays or Thursdays | Stock Market News
Source: Live Mint
The market regulator has proposed limiting the expiry of derivative contracts to either Tuesdays or Thursdays, a move that could upset the National Stock Exchange’s (NSE) plan to shift the last day for its weekly index option to Monday.
The proposed move is aimed at minimizing concentration risk and allowing product differentiation, according to a consultation paper released by the Securities and Exchange Board of India (Sebi) on Thursday. The paper seeks to formalize the final settlement days for derivative contracts across exchanges and avoid any unwarranted shuffling.
“Every exchange will continue to be allowed one weekly benchmark index options contract on their chosen day (Tuesday or Thursday)”, the paper said.
Currently, following a circular of 1 October, BSE Ltd and NSE have designated Tuesdays and Thursdays, respectively, as the expiry days for single stock and index options contracts.
However, after NSE recently changed its weekly expiry to Monday effective 4 April, Sebi concluded that having too many such days has the potential to revive hyperactivity on the day derivative contracts mature.
Sebi also clarified that exchanges must now seek prior approval from the regulator before launching or modifying any contract expiry or settlement day.
The regulator also proposed that the other equity derivatives contracts, including benchmark index futures, non-benchmark index futures/options, and single stock futures/options, will be offered with a minimum tenor of one month. These contracts will expire in the last week of the month on the exchange’s designated Tuesday or Thursday.
On 19 March, Mint reported that the market regulator may review a contentious proposal to introduce a gross limit for all clients trading in index options after receiving feedback against such a rule from several market participants, quoting a person in the know.
