Expiry Shift Alert: What NSE & BSE’s Move Means for Traders

NSE Shifts Expiry Date: Even as the domestic stock market continues to battle a storm, the exchanges seem to be in a completely different tug-of-war to gain market share. Earlier this week, the National Stock Exchange (NSE) shifted expiry dates for all F&O contacts and indices from Thursday to Monday, starting April 4. Interestingly, just 2 months ago, its rival, Bombay Stock Exchange (BSE) shifted its expiry date to Tuesday and Friday.

While the common talk is that bourses are following the Securities and Exchange Board of India's (Sebi) path to curb speculative trading present in the derivates space, especially F&O, analysts believe there is more to implementing a shift in expiries.

Battle for Market Share

NSE has a dominant market share when it comes to derivate trading volume. Its recent adjustment in expiry date sent BSE shares on a sharp downtrend of over 7%, earlier this week.

“By establishing an earlier expiry than BSE’s Tuesday schedule, NSE aims to recapture market share while aligning with SEBI’s mission to protect retail investors and reduce speculative excesses,” said Sumedh Pawse, senior analyst, investment research and analytics, Aranca. Goldman Sachs recently reduced its target price for BSE for the second time in a row as concerns over market share loss heightened this week. The shares of the company have plummeted over 20% on a year-to-date basis.

Such frequent moves by bourses clearly indicate their strategy to gain market share as well as showing potential steps to reduce speculation in the market as per Sebi guidelines, said Pawse.

However, some analysts are also viewing the recent adjustment as a step to reduce excessive volatility in the system. These recent shifts can also help streamline the operational process and improve the overall efficiency in the market. "In order to avoid the volatility and reduce the impact of global events over the weekend, the traders might square off their position on Friday. This can help in reducing the excessive volatility and short-term price speculation on the expiry day," said Ajay Garg, CEO, SMC Global Securities.

"With NSE changing its expiry to Monday, there might be a shift in hedging and trading strategies. Traders can also look to benefit from heightened volatility on Monday and capitalize on the market opportunities," he further added.