SEBI Changes the Game for Equity Derivatives
In a move that could significantly alter the trading calendar, SEBI has mandated that equity derivatives can only expire on either Tuesday or Thursday, and each exchange is allowed only one weekly index option contract at a time. The circular, which seeks to reduce product clutter and excessive speculation, requires stock exchanges to finalize and submit their chosen expiry day by June 15, 2025.
This is a landmark change for India’s derivatives market, known for its high retail participation and speculative volumes.
What’s Changing – And Why?
Currently, exchanges like NSE and BSE offer multiple weekly option expiries across indices (Nifty, Bank Nifty, Sensex, etc.), often expiring on different days (Monday to Friday). This allowed arbitrage, intraday strategies, and weekly option trading to flourish.
SEBI’s new rule aims to simplify this structure. Limiting expiry days to just one day per exchange (either Tuesday or Thursday) reduces overlap and potential confusion among traders. According to SEBI, this will also curb the “option casino” behavior seen in recent times, where traders treat weekly options like lottery tickets.
Impact on Traders and Market Structure
While the decision may improve market stability and reduce excessive leverage, it directly impacts option scalpers, expiry traders, and intraday option sellers who thrive on weekly theta decay.
Retail traders may feel restricted by reduced flexibility.
Brokerages and algo platforms might need to revise expiry-based strategies.
Institutional traders could welcome the clarity, but lose some hedging finesse.
With only one weekly contract per exchange, strategy overlaps may decrease — possibly leading to lower volumes, at least initially.
Will Exchanges Compete for Trader Attention?
The rule could trigger a competitive dynamic between NSE and BSE. If NSE selects Thursday for expiry, BSE may choose Tuesday to avoid direct overlap and attract unique volume.
This raises questions about liquidity migration:
- Will traders follow the expiry day or the exchange with higher liquidity?
- Will arbitrage opportunities disappear, or evolve into more sophisticated forms?
Strategic Shift or Overregulation?
SEBI’s intent is clear: reduce speculative froth and bring more discipline into derivatives. But critics argue it may hurt the very ecosystem that made India the world’s largest derivatives market by volume.
The success of this reform will depend on how exchanges implement it and how traders adapt.
Conclusion: Order in the Chaos or Chaos from Order?
SEBI’s expiry overhaul is a bold attempt to clean up India’s fast-growing derivatives space. Whether it leads to long-term maturity or short-term disruption depends on trader behavior, exchange execution, and market adaptability.
Written by Indira Securities SEBI Registered with 30 plus years of experience in Stock Market!!!