SEBI Proposes Standardised Final Settlement Day / Expiry Days for Equity Derivatives

SEBI has released a Consultation Paper proposing a uniform framework for expiry days of equity derivatives across exchanges. This move aims to reduce concentration risk, enhance market efficiency and ensure orderly trading in derivatives.

𝐁𝐚𝐜𝐤𝐠𝐫𝐨𝐮𝐧𝐝
Currently, exchanges decide expiry days independently, leading to frequent changes. Since January 2025, BSEIndia and NSE India have set Tuesday and Thursday as expiry days for derivatives, but one exchange now proposes shifting final settlement to Monday, creating potential market disruptions. Additionally, monthly expiry dates vary, adding to uncertainty.

Aided by technology, increasing digital access, and a diverse product range, India’s derivatives market has grown significantly over the past five years. Index options trading on expiry days has surged to record volumes, raising concerns about investor protection and market stability. To address these issues, SEBI introduced a series of measures via a circular on October 1, 2024. SEBI now seeks to standardize expiry schedules to bring predictability, reduce disruptions, and ensure balanced participation across days.

𝐊𝐞𝐲 𝐏𝐫𝐨𝐩𝐨𝐬𝐚𝐥𝐬
1.      𝐒𝐭𝐚𝐧𝐝𝐚𝐫𝐝𝐢𝐳𝐞𝐝 𝐄𝐱𝐩𝐢𝐫𝐲 𝐃𝐚𝐲𝐬: All equity derivatives will expire only on Tuesday or Thursday, ensuring uniformity across exchanges.
2.     𝐁𝐞𝐧𝐜𝐡𝐦𝐚𝐫𝐤 𝐈𝐧𝐝𝐞𝐱 𝐖𝐞𝐞𝐤𝐥𝐲 𝐎𝐩𝐭𝐢𝐨𝐧𝐬: Each exchange can retain one weekly benchmark index options contract on its chosen expiry day (Tuesday or Thursday).
3.     𝐌𝐨𝐧𝐭𝐡𝐥𝐲 𝐄𝐱𝐩𝐢𝐫𝐲 𝐀𝐥𝐢𝐠𝐧𝐦𝐞𝐧𝐭: All single-stock futures/options and non-benchmark index derivatives will have a minimum tenure of one month, expiring on the last Tuesday or last Thursday of the month.
4. SEBI 𝐀𝐩𝐩𝐫𝐨𝐯𝐚𝐥 𝐟𝐨𝐫 𝐄𝐱𝐩𝐢𝐫𝐲 𝐂𝐡𝐚𝐧𝐠𝐞𝐬: Any modification to expiry or settlement days will require prior SEBI approval to prevent frequent alterations.

𝐈𝐦𝐩𝐥𝐞𝐦𝐞𝐧𝐭𝐚𝐭𝐢𝐨𝐧 𝐚𝐧𝐝 𝐍𝐞𝐱𝐭 𝐒𝐭𝐞𝐩𝐬:
Market participants and stakeholders are invited to submit feedback by April 17, 2025. SEBI aims to introduce a structured expiry-day framework, preventing arbitrary shifts by exchanges while ensuring orderly market operations.

A copy of the Consultation Paper is attached.

Readers are welcome to submit their comments to SEBI or reach out to Regstreet Law Advisors at info@regstreetlaw.com.