SEBI limits derivatives expiry days to Tuesday or Thursday

The Securities and Exchange Board of India (SEBI) has decided that equity derivative expiries will be restricted to either Tuesdays or Thursdays. This change will take effect from June 15, according to the market regulator, which announced the decision on Monday. The move is aimed at improving investor protection and promoting market stability. 

In a statement on Monday, the market watchdog made it clear that spacing out expiry days through the week mitigates risk while enabling stock exchanges to offer product differentiation.

The development marks a shift from SEBI’s decision, announced in October, to limit the number of weekly options contracts to one benchmark index per bourse. 

Since then, bourses have aligned their weekly expiries to the guideline, but have also been trying to offer contracts expiring on different days of the week. 

The system of “too many expiry days” has the “potential to revive expiry day hyperactivity”, which can potentially hinder investor protection and market stability, according to SEBI. 

Exchanges’ attempts at offering derivative contracts expiring on separate days goes against SEBI’s goal of reducing opportunities for retail investors to speculate on such contracts.

Exchanges will now have to seek SEBI’s prior approval for modifying the settlement day of derivatives contracts, it noted. 

Currently, NSE offers expiries on Thursdays while BSE offers them on Tuesdays.