SEBI Poised to Finalise Reforms on F&O Expiry Days

India's market regulator, SEBI, is preparing to roll out a major overhaul of futures and options (F&O) trading, especially around expiry days. The goal? To reduce risky speculation and keep the market running smoothly and fairly.

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Why These Changes Now?

Retail investors have been diving into F&O trading like never before. In August 2024, India topped the world in derivatives trading with a jaw-dropping ₹10,923 trillion in monthly trade value. But here's the catch: most individual traders are losing money. SEBI found that over three years, retail investors lost a total of ₹1.81 trillion, and just 7.2% of them made a profit.

That set off alarm bells. Expiry days in particular have become hotbeds of volatile, high-stakes trading, raising concerns about investor safety and potential risks to the broader market.

What SEBI is Proposing

1. Fewer Weekly Expiries

Right now, traders can bet on several indices with weekly expiries. To tone down the daily speculative frenzy, SEBI wants to allow just one weekly expiry per exchange.

2. Set Expiry Days

All equity derivative contracts would expire on either Tuesday or Thursday. There would be no more random expiry dates, just a consistent schedule to help calm the market.

3. Bigger Contract Sizes

SEBI plans to increase the minimum value of index derivative contracts from ₹5-₹10 lakh to ₹15 lakh, aiming to ensure that only those with enough financial backing participate.

4. No More Expiry Day Spread Perks

On expiry days, traders won’t be able to reduce risk by offsetting contracts that expire on different dates. This closes a loophole that can distort market behaviour on high-volume days.

5. Real-Time Position Checks

Exchanges must check traders’ position limits at least four times daily. That’s a big step toward stopping oversized bets before they spiral.

6. Extra Margins on Expiry Day

To help cushion wild market swings, expect an added 2% margin on all open short options on expiry days.

How the Market’s Reacting

Not everyone’s cheering. Brokerages, which earn a big chunk of their income from derivatives, could see revenues fall by 30% to 50%.

On the flip side, the Bombay Stock Exchange (BSE) is getting a boost. Its stock jumped after SEBI’s expiry day proposal. The changes might help BSE claw back market share, potentially bumping its options market slice to 25–30% by mid-2026.

When’s This All Happening?

Here’s the rollout plan:

Nov 20, 2024: Weekly expiries cut down, contract sizes increased, and expiry day margin rules kick in.
Feb 1, 2025: Say goodbye to expiry day calendar spreads and hello to upfront premium collection.
Apr 1, 2025: Intraday checks on trader positions go live.

The Bottom Line

SEBI’s about to shake up the F&O scene, and it's not just for show. These reforms protect everyday investors and bring more order to a fast-growing but risky market corner.

Yes, some firms might take a short-term hit. But the bigger picture is a more stable, transparent, and investor-friendly derivatives market.