In a significant move aimed at enhancing market stability and investor protection, the Securities and Exchange Board of India (SEBI) has proposed limiting the expiry days of all equity derivatives contracts to either Tuesdays or Thursdays. This initiative seeks to optimize the spacing of expiration dates and follows previous measures to regulate derivatives trading.
The derivatives market in India has witnessed exponential growth, with daily turnover frequently surpassing ₹400 trillion. This surge has been accompanied by concerns over heightened speculative trading and its potential impact on market integrity. SEBI's latest proposal aims to provide predictability to investors and maintain orderly market conditions by standardizing the expiry days of derivatives contracts.
According to the consultation paper released on March 27, 2025, SEBI has outlined the following key proposals:
- All equity derivatives contracts on an exchange will have their expiries uniformly limited to either Tuesdays or Thursdays. This uniformity is intended to provide optimal spacing between expiries across exchanges, avoiding the selection of either the first or last day of the trading week as an expiry day.
- Each stock exchange may choose their preferred expiry day—Tuesday or Thursday—for weekly index derivatives contracts. This flexibility allows exchanges to align their product offerings with their strategic objectives while adhering to the proposed uniformity.
- For monthly expiries of index derivatives, SEBI proposes that these occur in the last week of the month, on either a Tuesday or Thursday, as chosen by the respective exchange. This scheduling aims to streamline the expiration process and reduce market disruptions.
- Exchanges will be required to seek SEBI's approval before launching or modifying any contract expiry or settlement day. This measure ensures regulatory oversight and consistency in the implementation of expiry schedules.
The proposal has elicited varied reactions from market participants. Shares of BSE Ltd. surged by 18% following the announcement, as analysts anticipate that the new expiry schedule could help BSE prevent market share loss and potentially increase its options trading market share to over 25-30% by the second quarter of FY2026.
Conversely, the National Stock Exchange (NSE), which currently holds the majority market share in options trading, may need to reassess its strategies to maintain its competitive position under the new framework.
This proposal is part of SEBI's ongoing efforts to regulate the derivatives market. In October 2024, SEBI implemented measures to reduce the number of weekly options contracts available to investors, allowing only one per benchmark index per exchange. These actions were aimed at curbing excessive speculation and mitigating systemic risks associated with high-frequency derivatives trading.
SEBI has invited public comments on the proposed changes until April 17, 2025. Stakeholders, including investors, exchanges, and market intermediaries, are encouraged to provide feedback to ensure that the final regulations balance market development with investor protection.
The implementation of these proposals will depend on the outcomes of the consultation process and subsequent regulatory approvals. Market participants are advised to stay informed about these developments and assess the potential impact on their trading strategies and operations.
SEBI's proposal to standardize the expiry days of equity derivatives contracts represents a proactive step towards enhancing market stability and protecting investors. By limiting expiries to Tuesdays or Thursdays, the regulator aims to provide a predictable and orderly framework for derivatives trading, thereby fostering a more resilient financial market environment.
