Sebi seeks more details from bourses before options date shift

Sebi Steps In: NSE and BSE's Index Options Expiry Date Showdown

The battle for dominance in India's stock exchange market is heating up, with the Securities and Exchange Board of India (Sebi) now intervening in a dispute over weekly index options settlement dates. Both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) have been ordered to submit their plans for a proposed shift in expiry dates by June 15th before any changes are approved.

The Stakes are High: This isn't just about dates; it's about market share and revenue. The shift impacts the lucrative index options market, a major revenue driver for both exchanges. A subtle change in expiry dates can significantly impact trading volumes and ultimately, the bottom line.

Understanding the Complexity: The exchanges run multiple index options contracts concurrently – weekly, and three monthly contracts (front, mid, and far months). The shift in weekly expiry dates impacts this entire system. Sebi's directive aims to ensure a smooth transition, minimizing market disruption.

• The Background: A Sebi circular from October 1st, 2023, aimed to curb retail frenzy in options trading by increasing trading costs and limiting weekly expiries. This left the choice of the weekly expiry day to the exchanges, sparking the current conflict.
• The Power Play: NSE and BSE have been maneuvering for an advantageous expiry date. BSE's recent shift to a Tuesday expiry, away from NSE's Thursday expiry, increased its market share. NSE's subsequent proposal to shift to Monday triggered Sebi's intervention.
• Sebi's Role: The regulator seeks to ensure a fair and stable market, balancing the interests of both exchanges and the investing public. The June 15th deadline forces both NSE and BSE to present their plans to Sebi, facilitating a mutually agreeable solution.

Market Impact: The shift in expiry days has already shown its impact. BSE's market share in index options, based on premium turnover, jumped to 15.3% in Q1 2024 from 13.9% in the previous quarter, while NSE's share dropped correspondingly.

Financial Implications: The importance of index options trading to the exchanges' revenue is undeniable. For NSE, transaction charges from equity options (including index options) contributed a substantial 76% (₹2227 crore) to their ₹5,860 crore standalone total income in the March quarter.

The Outlook: While queries to NSE, BSE, and Sebi remained unanswered, market watchers anticipate a final decision that could significantly reshape the competitive landscape of India's stock exchange market. The outcome will likely determine which exchange gains the upper hand in the fiercely contested index options segment.

Gopika Gopakumar in Mumbai contributed to this report.