The Securities & Exchange Board of India (Sebi) plans to end weekly expiry hit stocks of brokerage firms, clearing houses and the only listed stock exchange – BSE – on Thursday.
The stock price of BSE and Angel one were down l 4.5% and 4.9%, respectively. Nuvama Wealth’s stock price closed 3.4% lower. Share prices of CDSL and NSDL also fell around 1% down each.
According to a report by CNBC-TV18, the market regulator is likely to float a paper on bringing an end to weekly expiries.
Data from exchanges indicate that NSE’s weekly contracts accounted for 86.8% notional value traded in the index options market on Wednesday and BSE’s was more than 99%.
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“This will rattle the market and affect the incomes of both exchanges and brokers,” said an industry participant who did not wish to be quoted. He said that Sebi is concerned about the losses made in the segment, while there is some amount of speculation, these instruments are also used for hedging purposes.
BSE CEO Sundararaman Ramamurthy had told FE last month: “We feel that we need to educate market participants on the importance of monthly products and their benefits for arbitrage or hedging. So, we are in the process of doing so. At some point, this will have its impact.”
Anticipated impact on the market
The participants are worried that this change will lead to a similar kind of a volume impact which was seen when SEBI asked exchanges to have only one index which led to the discontinuation of weekly expiry of banking indices, which lost all its volumes after the shift.
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Last month, Sebi chairman Tuhin Kanta Pandey at an event had said that a consultation paper in this regard will be initiated after taking opinions from the stakeholders. Whole-time member Anant Narayan explained the rationale that India’s equity derivatives market is heavily skewed towards ultra-short-term trades, particularly expiry-day index options. He said unlike longer term derivatives, short-term derivative product short-term such as expiry day trading in index options may detract from capital formation.
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