SEBI tightens expiry-day margins for single-stock derivatives

Markets regulator SEBI has tightened margin norms for single‑stock derivatives by withdrawing calendar spread margin benefits on the day of expiry. The move is designed to reduce the risk of sudden margin shortfalls that can disrupt market stability.

According to the circular issued on Thursday, positions involving a contract expiring on that day will no longer qualify for offsetting benefits. Calendar spread margin treatment will remain unchanged for all other non‑expiring contracts as per the updated framework.

Withdrawal Of Calendar Spread Benefit for Expiring Contracts

SEBI’s revised rules specify that any position involving an expiring single‑stock derivative contract will not be eligible for calendar spread margin benefits during the expiry session. The regulator noted that once one leg of a spread expires, traders are exposed to sharp price movements in the remaining leg.

Removing the margin benefit is intended to address this risk by ensuring full margin coverage on the expiring day. This change helps prevent unexpected increases in margin obligations after expiry.

Rationale Behind the Regulatory Revision

The decision was made following concerns raised by trading members regarding abrupt margin jumps on expiry day. SEBI discussed the issue with its Secondary Market Advisory Committee before finalising the rule change.

The regulator emphasised that the objective is to give brokers and clients more time to arrange additional margins or roll over or close positions as needed. By removing the expiry‑day concession, SEBI aims to smoothen operational processes and limit market disruption.

Treatment Of Spreads Involving Non‑Expiring Contracts

Under the revised framework, spreads between non‑expiring contracts, such as next‑month and far‑month positions, will continue to receive margin benefits. The change applies strictly to spreads that include the expiring leg, which will now attract full margins on that day.

This ensures that offsetting exposures remain eligible only when both legs of the strategy continue to exist. The selective withdrawal supports more accurate risk assessment across different expiry cycles.

Alignment With Index Derivative Rules and Implementation Timeline

SEBI stated that the new norms bring single‑stock derivatives in line with existing guidelines for index derivatives. The updated rules will take effect 3 months from the date of the circular, making the implementation date May 5, 2026.

Stock exchanges and clearing corporations have been directed to modify their systems and byelaws accordingly. This provides market infrastructure institutions with adequate time to adapt processes to the new requirements.

Read More: SEBI Proposes to Simplify Exits for Mutual Fund Investors in Demat Form.

Conclusion

SEBI has revised the margin framework for single‑stock derivatives by removing calendar spread benefits on expiry day to mitigate margin‑related risks. The change ensures that traders carrying positions linked to expiring contracts maintain full margin coverage.

Spreads involving non‑expiring derivatives will continue to enjoy relief, preserving flexibility for longer‑dated strategies. With implementation scheduled for May 5, 2026, the updated rules enhance market discipline and streamline risk management during expiry sessions.

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