On March 27, 2025, the Securities and Exchange Board of India (“SEBI”) issued a Consultation Paper on standardizing the final settlement day (expiry day) for equity derivatives contracts across exchanges (“Consultation Paper”).[1] The Consultation Paper aims to ensure market predictability, reduce risk concentration, and optimize expiry scheduling. SEBI invites public comments and feedback on the proposals contained in Annexure-A of the Consultation Paper, latest by April 17, 2025.
I. Background
- Equity derivatives contracts currently have varying expiry days across different exchanges, leading to inefficiencies in risk management and liquidity fragmentation.
- Market participants raised concerns about unpredictability in expiry scheduling, which can impact volatility, trading strategies, and hedging mechanisms.
- In view of the same, SEBI seeks to streamline expiry schedules to enhance market stability, reduce excessive concentration risks, and provide room for product innovation while ensuring investor protection.
II. Proposed Change
- Uniform Expiry Day: All exchanges must select either Tuesday or Thursday as the expiry day for equity derivatives contracts, avoiding the first and last trading days of the week.
- Weekly Benchmark Index Options: Each exchange may designate 1 (one) weekly benchmark index options contract on their chosen expiry day (Tuesday or Thursday).
- Monthly Expiry Standardization: All other equity derivatives, including benchmark index futures, non-benchmark index futures/options, and single-stock futures/options, will have a minimum tenor of 1 (one) month, with expiry in the last week of the month (last Tuesday or last Thursday).
- SEBI Approval for New Expiries: Exchanges shall now be required to seek SEBI approval prior to launching or modifying any contract expiry or settlement day.
[1] https://www.sebi.gov.in/reports-and-statistics/reports/mar-2025/consultation-paper-on-the-final-settlement-day-expiry-day-for-equity-derivatives_93087.html