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India’s largest bourse, the National Stock Exchange of India Ltd., unexpectedly changed the expiration day for its listed equity derivatives to Mondays from Thursdays.
Starting April 4, all monthly, quarterly and semi-annual futures and options on indexes and stocks will expire after the market close on the last Monday of the expiry month, according to an exchange circular late Tuesday. Weekly contracts on the benchmark NSE Nifty 50 Index — the only NSE weeklies remaining after recent curbs from the regulator — will mature on the Monday of the expiry week.
“The change to Monday was made based on stakeholder feedback and international practices,” Sriram Krishnan, chief business development officer at NSE told Bloomberg News on phone, adding the exchange is open to “reconsidering” the expiry day based on the feedback it receives.
Deven Choksey, managing director at DRChoksey FinServ Pvt., warns the NSE change could lead to some risks for traders.
“The Monday expiry opens up significant weekend carry over risk,” he said. As stock derivatives are physically settled, a sharp move based on weekend news could make it difficult for traders to deliver shares against outstanding positions, he added.
Just in November, the bourse announced it would move the expiry day of several index derivatives to Thursday, aligning it with the day for the most-traded contracts on Nifty indexes. It followed peer BSE Ltd.’s decision to streamline all of its derivatives expiries to Tuesday, including that for the weekly S&P BSE Sensex Index options that used to mature on Fridays.
“The NSE’s intention with this change may be to get ahead of the BSE expiry,” said Abhilash Pagaria, head of alternative and quantitative research at Nuvama Institutional Equities.
BSE’s shares tumbled as much as 9.4% to their lowest level in more than four months on Wednesday, as the NSE’s move sparked fears of dwindling volumes at Asia’s oldest bourse.
NSE’s announcement comes just days after Tuhin Kanta Pandey became the new chief of the Securities and Exchange Board of India. His predecessor, Madhabi Puri Buch, introduced some of the regulator’s toughest measures to arrest an explosion in derivatives trading, including reducing the number of weekly options available and increasing minimum contract sizes.