Context:
The National Stock Exchange (NSE) has proposed shifting the weekly expiry of its index derivative contracts to Tuesday, moving away from the current Thursday expiry. This move comes in light of SEBI’s proposal to limit expiry days to only two weekdays: Tuesdays and Thursdays, aiming to reduce expiry-day volatility.
Key Developments
- SEBI’s New Expiry Framework
- SEBI’s Secondary Market Advisory Committee recently discussed limiting weekly expiries to only two days to curb volatility.
- SEBI Chairman Tuhin Kanta Pandey confirmed a final circular will be issued soon.
- NSE’s Expiry Strategy Shift
- NSE had earlier dropped its plan to shift expiry to Monday.
- After internal analysis, NSE now sees Tuesday as the most suitable option for expiry.
- BSE’s index options already expire on Tuesdays, making NSE’s choice aligned with the current landscape.
- Market Implications
- This move follows regulatory changes that limit one benchmark expiry per exchange per week, affecting NSE’s derivatives volume.
- NSE’s Q4FY25 revenue from transaction charges fell 15% quarter-on-quarter, reflecting a dip in cash and derivatives volumes.
- Despite this, NSE management stated they don’t foresee further loss of market share to BSE in the derivatives segment.
- SEBI’s Ongoing Work on NSE IPO
- SEBI is actively resolving pending issues around the long-delayed NSE IPO.
- While no definitive timeline was given, SEBI chair said the IPO clearance may happen soon.
Strategic Implications
- Expiry Consolidation:
- Limiting weekly expiries could streamline market operations, curb excessive volatility, and balance liquidity between exchanges.
- Market Share Battle:
- The expiry reshuffle follows intensified competition between NSE and BSE, with the latter gaining share post-regulation.
- IPO Prospects:
- Resolving IPO hurdles could unlock significant valuation for NSE and widen retail and institutional participation.
