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SEBI May Shift Weekly Index Expiry to Fortnightly to Curb Options Frenzy

In a move that could reshape index derivatives trading in India, the Securities and Exchange Board of India (SEBI) is reportedly considering a shift from the current weekly expiry system to a fortnightly schedule. This potential reform comes amid efforts by the regulator to control the booming activity in the index options segment, especially among retail investors.
According to a Mint report published on July 9, the regulator may introduce a fortnightly expiry format or reduce the frequency to a single benchmark index expiry per fortnight. The proposal follows the implementation of several measures this month aimed at controlling volumes and limiting speculative trading. However, if the existing changes fail to significantly reduce volumes, Sebi may roll out these additional changes.

Currently, the BSE’s Sensex options expire on Tuesdays, and the NSE’s Nifty options expire on Thursdays. Under the new plan being considered, this dual-weekly expiry system may be replaced by a single expiry every two weeks, reducing expiry-induced volatility and speculation.
Background: Why SEBI Is Concerned?
The index options segment has seen a surge in retail participation over the past few years, driven by low capital requirements and the potential for quick gains. However, SEBI’s internal studies revealed that the majority of individual investors in the futures and options (F&O) market continue to incur losses. Data shows that 9 out of 10 retail traders lose money in F&O trades despite the booming turnover figures.
In light of these findings, SEBI introduced a new set of F&O 2.0 norms in 2024. These included nine key reforms, such as adjusting position limits on index options, refining the calculation of open interest, and allowing specific positions during ban periods only if they reduce risk exposure.
SEBI’s crackdown intensified earlier this year when it barred U.S.-based trading firm Jane Street from participating in Bank Nifty contracts, accusing it of manipulating market sentiment by executing misleading bullish and bearish trades within the same session. Jane Street has contested the charges.
Conclusion: What Lies Ahead?
The regulator will closely monitor index option volumes in the coming weeks to assess the impact of recent measures. If they prove ineffective, a fortnightly expiry model may soon be adopted. The goal is clear: reduce excessive churn and minimise expiry-day distortions while encouraging more informed and long-term participation in the derivatives market.
If implemented, this change would not only impact trading strategies but also necessitate adjustments to investors' and brokers' operational calendars and risk management frameworks.
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