Final week, the Nationwide Inventory Alternate stated it’s shifting the F&O settlement of all contracts to Monday beginning April 4.
In a round, the premier F&O bourse stated, Nifty weekly contracts, Nifty month-to-month, quarterly and half-yearly contracts, Financial institution Nifty month-to-month and quarterly contracts and Fin Nifty, MidCap Nifty and Nifty Subsequent 50 month-to-month contracts would expire on Monday. All single-stock futures may even expire on Monday, the round added. Revised expiry date of all current derivatives contracts will likely be accessible within the contract file generated on April 3 to keep away from operational complexities.
Of late, exchanges have been altering the settlement cycle of F&O contracts fairly ceaselessly. As an illustration, the BSE modified expiry days of all contracts from Friday to Monday. Earlier, the BSE had modified the weekly expiry of contracts to Monday from Thursday in its fairness derivatives section, from October 16, 2023.
The Nifty Monetary had its expiry on Tuesday and the Nifty Midcap Choose on Wednesday. Nifty Monetary, that was launched with preliminary expiry day on Thursday, was later modified to Tuesday. In fact, Nifty50 has been persevering with with Thursday’s settlement ever because it was launched in 2000.
Following the discontinuation of weekly contracts for Nifty Financial institution, FinNifty, Nifty Midcap Choose, and Nifty Next50, the NSE has revised the month-to-month expiry days of those 4 F&O contracts to Thursday, efficient January 1, 2025.
Market share
By shifting the settlement day, NSE is probably making an attempt to retain its dominant market share in a section the place BSE is making an attempt to make some headway. Following the announcement, shares of BSE have been on a downtrend, dropping 10 per cent in March up to now.
Derivatives market witnessed an exponential progress, as turnover jumped from ₹33 lakh crore in 2016-17 to just about ₹600 lakh crore in 2024-25 on the NSE.
Why Thursday?
When F&O was launched in 2000, there was no rolling settlement for money market. The BSE had its settlement cycle from Monday to Friday; all trades that occurred between Monday and Thursday needed to be settled (supply of shares to the patrons and cost of money to the sellers) on the following Friday. Equally, on the NSE, trades needed to be settled each Tuesday.
Due to this fixed-day settlement for the money section, Mondays and Fridays (as a result of BSE) and Wednesdays and Tuesdays (as a result of NSE) had witnessed extreme volatility.
To keep away from systemic and default dangers and for profitable rollout of F&O, the regulator and exchanges most popular Thursdays, which noticed comparatively low money volumes and fewer volatility in worth motion.
With the introduction of rolling settlement cycle, particularly in T+0 period, shifting of expiry mustn’t trigger any drawback for merchants.
Nevertheless, Monday settlement might catch merchants off-guard if some market-shaking occasion occurs throughout Saturday or Sunday, forward of the expiry, for which they might must pay heavy premium. It will likely be fascinating to see whether or not BSE will as soon as once more change its expiry day. In keeping with experiences, NSE chief needs uniform expiry throughout bourses, whereas the CEO of BSE stated he’ll search suggestions from market contributors earlier than reacting to a current change in derivatives expiry day by NSE.
Solely time will inform whether or not this transfer from NSE is nice or dangerous, however frequent shifting will little question have an effect on dealer sentiment. Nevertheless, what’s particular is that fascinating days are forward within the F&O area.
