NSE CEO Proposes Common F&O Expiry Day Across All Exchanges

Ashish Chauhan, Managing Director and CEO of the National Stock Exchange (NSE), has suggested that all Indian exchanges should have a common futures and options (F&O) expiry day. His proposal comes amid concerns that multiple exchanges may introduce daily expiries, increasing market complexity and speculation.

Speaking on March 7, Chauhan stated:
"Many exchanges have expressed a desire to start newer daily expiries. If you really want to remove that, you need to have one single day for expiry across all exchanges."

His remarks come just days after NSE announced a shift in its F&O expiry day from Thursdays to Mondays, effective April 4. The move aims to reduce speculative trading, which is often concentrated on expiry days.

SEBI’s View on Derivatives Regulation

SEBI’s Whole-Time Member Ananth Narayan supported measures to curb excessive speculation in the derivatives market. He highlighted that:

• Trading in index options has declined without negatively affecting the broader derivatives market.
• The regulator is monitoring market trends and will take further steps if necessary.
• SEBI's analysis revealed that 89% of F&O traders incur losses, with 93% of index derivatives trades being unprofitable.
• Many traders who consistently lose money continue participating in F&O trading for multiple years, raising concerns about financial risk exposure.

Narayan emphasized that SEBI's regulatory interventions were formulated in consultation with market participants. The intent is to balance market efficiency with investor protection while discouraging excessive speculation.

Impact of a Common Expiry Day

Implementing a single expiry day across exchanges could have significant effects:

• Reduces market fragmentation by consolidating trading volumes.
• Prevents speculative daily expiries introduced by multiple exchanges.
• Improves risk management by ensuring a structured rollover process for derivatives contracts.
• Aligns Indian markets with global practices, where expiry days are standardized across major stock exchanges.

Chauhan also suggested incentivizing early rollover of positions, which could help smooth out trading volumes and prevent excessive volatility on expiry days.

NSE’s Shift to Monday Expiry – A Step Towards Reform

NSE’s decision to move its F&O expiry from Thursdays to Mondays (starting April 4, 2025) is seen as a significant market reform. The change aims to:

• Reduce speculative trading by limiting expiry-day volatility.
• Prevent concentration of trades on a single day, thus distributing trading activity more evenly.
• Encourage a more stable derivatives market, reducing extreme price movements caused by high-volume expiries.

Future Outlook for the Derivatives Market

With the derivatives market growing rapidly, SEBI and exchanges like NSE are closely monitoring trading patterns. If more exchanges introduce daily expiries, SEBI may consider implementing uniform expiry regulations to maintain market stability.

Investors and traders should remain cautious about F&O risks, as regulatory measures aim to reduce excessive speculation and ensure that derivatives trading serves its intended purpose of risk management rather than pure speculation.