With the National Stock Exchange (NSE) pushing for a switch in the weekly expiry day of its index derivative contracts to Tuesday from Thursday, it will pit the two big exchanges in the country against each other, as competitor BSE has its weekly expiry on Tuesday.
Analysts feel that BSE may face a higher competitive intensity, potentially forcing it to shift its expiry day to Thursday.
For instance, global brokerage firm Goldman Sachs expects BSE to move its expiry to Thursday.
However, such a switch in expiry day, if approved by the regulator, might still reduce BSE’s market share in index options premium by 3-4 percentage points to approximately 18.8 percent from 22.2 per cent so far this year, it said.
NSE has applied to the markets regulator SEBI to move its expiry day to Tuesday after it had to defer its earlier plan to shift to Monday, according to sources aware of the matter. SEBI is yet to approve the stock exchange’s application.
Following reports of NSE’s application, shares of BSE fell over 5 per cent on Thursday.
All this comes at a time when SEBI has proposed to limit weekly expiries to only two days – Tuesdays and Thursdays. SEBI chief Tuhin Kanta Pandey said recently at an event that the regulator will soon issue the final circular regarding expiry days.
Expiry shift
While having a dedicated expiry day for an exchange might benefit the stock exchanges to find favour with market participants, regulatory sources expect more number of expiry days – particularly if new entrants wish to have weekly expiries – to lead to an increase in the hyperactivity in index options.
Sources said that SEBI may allow NSE to shift its expiry day to Tuesday as it cannot allow dedicated expiry days for each exchange “in the interest of market stability and to strengthen the index derivatives framework.”
This would see both the main exchanges – NSE & BSE – compete for expiry day volumes on the same day, leaving space for other exchanges such as MSE and NCDEX to launch weekly options contracts, if any, on Thursday.
Queries emailed to SEBI, NSE and BSE for comments did not elicit a response till the time of going to press.