Sebi Implements New Rules for Equity Derivatives Expiry Days on Tuesdays and Thursdays

The Securities and Exchange Board of India (Sebi) announced that all equity derivatives contracts across exchanges will now expire on either Tuesdays or Thursdays. This change aims to optimise the spacing between expiries, avoiding the designation of the first or last day of the week as expiry days.

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In its circular, Sebi stated that exchanges must seek approval before launching or modifying any contract expiry or settlement day. This approach reduces concentration risk and allows exchanges to offer product differentiation. However, too many expiry days could lead to hyperactivity, risking investor protection and market stability.

Uniform Expiry Days for Equity Derivatives

Sebi specified that all equity derivatives contracts on an exchange will have expiries limited to Tuesday or Thursday. Each exchange can continue offering one weekly benchmark index options contract on their chosen day. This ensures a consistent framework across all exchanges.

Benchmark index options contracts, along with other equity derivatives like benchmark index futures and single stock futures/options, will have a minimum tenor of one month. Their expiry will occur in the last week of each month on the selected day, either the last Tuesday or Thursday.

Implementation Timeline and Previous Proposals

To implement this framework, Sebi has asked stock exchanges to submit their proposals by June 15. Earlier in March, Sebi proposed limiting expiries to Tuesdays or Thursdays through a consultation paper. This led the National Stock Exchange (NSE) to defer its plan to change expiry days from Thursday to Monday.

The NSE had planned to shift all index and stock derivative expiries from Thursday to Monday starting April 4, 2025. However, this plan was put on hold following Sebi's consultation paper, ensuring alignment with the new guidelines.

This initiative by Sebi aims to streamline expiry days across exchanges while maintaining market stability and protecting investors. By standardising expiry days, Sebi seeks to balance risk management with opportunities for product differentiation among exchanges.

With inputs from PTI