MSE, NCDEX Dissent To Two-Day Weekly Expiry Plan, Asked To Submit Views To SEBI —Profit Exclusive

In the last meeting of the SEBI-constituted committee on derivatives market reform, the Metropolitan Stock Exchange and the National Commodity and Derivatives Exchange voiced dissent against the proposal to restrict weekly derivative contract expiries to just two days, people close to the matter told NDTV Profit.

The exchanges urged the Securities and Exchange Board of India to instead allow each exchange to have its own distinct expiry day, a move they argued would promote fair competition and support the growth of new entrants in the derivatives space.

Resultantly, the panel asked both exchanges to submit detailed representations to the markets regulator. They have been asked to explain how their proposal would aid capital formation or benefit investors.

According to the people cited above, who were present at the meeting, MSE and NCDEX warned that fixed expiry days—especially if reserved for the two dominant players, NSE and BSE—could restrict market flexibility, create structural rigidity, and limit opportunities for innovation. They said such a framework would make it harder for newer or smaller exchanges to attract participation, thereby entrenching the incumbents' dominance.

The exchanges also flagged that an uneven playing field could emerge if new entrants are forced to compete under the same expiry day regime, as well-established exchanges with deeper liquidity and entrenched market positions.

The exchanges suggested that SEBI could consider granting temporary relaxation to new entrants, allowing them a unique expiry day during their initial phase. This would help boost their competitiveness and enable a more gradual market entry.

However, SEBI pointed that before the initial October 2024 curbs on F&O volumes, five different expiry days across NSE and BSE reportedly led to increased hyperactivity in index options trading. The regulator then rationalised the number of expiry days to three—allocated across NSE, BSE, and MSE—in an attempt to curb excessive speculation and strengthen market stability.

SEBI also noted that other exchanges had shown increased interest in launching index derivatives, possibly under the assumption that they would be given dedicated expiry days. The regulator expressed concern that expanding the number of expiry days could reverse recent efforts to bring discipline and restraint to the derivatives market.

The committee broadly backed SEBI's view that product innovation solely on the basis of differing expiry days may not be in the best interest of market stability. It advised MSE and NCDEX to clearly demonstrate how their proposal aligns with investor interest and long-term capital market development.

In a brief statement attributed to an MSE spokesperson, the exchange said it had taken a deliberate and phased approach to developing its equity and derivatives segments, with market depth and stability as guiding principles. MSE urged SEBI to retain its current Friday expiry day, describing it as “a vital step toward levelling the competitive playing field” and calling for parity with the established exchanges.

Requests for responses sent to the regulator and the NCDEX, did not elicit a response.

As reported previously, SEBI is likely to finalise a proposal that would mandate all equity derivative contracts—futures and options—on each exchange to expire only on either Tuesday or Thursday.

Each recognised stock exchange will be allowed one weekly index options contract, which must expire on either Tuesday or Thursday, depending on the exchange's choice. This means an exchange can offer a weekly expiry on either of the two days, but not both.