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India’s largest options contract Nifty Bank will have its last weekly expiry today; What it means for investors and traders
Nifty Bank will have its last weekly expiry today
India’s largest options contract Nifty Bank will have its last weekly expiry today as Sebi’s new regulations come into force from next week.
The Securities and Exchange Board of India (SEBI), in a regulatory update on 10 October 2024, announced several measures to enhance investor protection and market stability in the derivatives segment. One notable change is the limitation of weekly derivatives contracts to a single index per exchange, intending to reduce volatility in the market during contract expiry days. In response to this new regulation introduced by SEBI, the National Stock Exchange of India (NSE) has announced plans to discontinue weekly index derivatives for the Bank Nifty, Nifty Midcap Select, and Nifty Financial Services indices.
Nifty Midcap Select will see its last weekly expiry on November 18 while the last date for Nifty Financial Services is November 19.
Nifty Bank and the other two indices will, however, continue to be available for monthly expiry trading.
“We are in talks with Sebi if all the monthly expiries should be held on the same day or on different days of the week. Guidelines will come,” Sriram Krishnan, Chief Business Development Officer, NSE, said.
In the first half of FY25, Nifty Bank had the highest share of 38 per cent in terms of premium turnover in the derivatives market. Nifty was second on the spot with 28 per cent share, followed by BSE Sensex at 7 per cent and BSE Bankex at 3 per cent, according to IIFL Research.
Impact on Investors and Traders
Nifty Bank traders will now have to look for other options with market experts saying that volumes will get shifted to monthly expiries as well as other products.
The discontinuation of weekly expiry contracts will have an impact on traders and investors who use these contracts for their trading strategies. The discontinuation could lead to changes in volatility patterns and pricing dynamics. It is advisable for investors to closely monitor market movements and consider alternative investment options.
“Nifty Bank and Nifty weeklies cater to different types of traders. While Nifty is a broad market benchmark, Nifty Bank is a sectoral index and has the least number of constituents and a lower lot size making it the most volatile of the two. So those who have gotten used to the wild swings and multiple trading opportunities that such volatility presents, will certainly miss it, but isn’t that what SEBI intended in the first case,” Anand James, Chief Market Strategist, Geojit Financial Services, ..
As the new rules kick off in a staggered manner beginning from November 20, analysts say that the six steps proposed by Sebi will have a positive impact on the market ecosystem by discouraging casual traders looking to make a quick buck.
“We see phased implementation over the next 3-6 months as a big positive for market health as it prevents any systemic shocks and leads to a calibrated tightening of the market,” Jefferies said.
Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
