SEBI May Shift to Fortnightly Expiry to Curb Index Options Activity: Report

India’s capital markets regulator, the Securities and Exchange Board of India (SEBI), is reportedly evaluating further changes to the index derivatives market, including shifting the current weekly contract expiry to a fortnightly cycle. The move aims to moderate the sharp rise in index options trading activity, according to a report by Mint.

As per the publication, SEBI may introduce fortnightly expiries or restrict expiries to one benchmark index per fortnight, depending on the impact of recent regulatory interventions.

SEBI Monitoring Impact of July Derivatives Measures

The Mint report highlights that the Securities and Exchange Board of India (SEBI) is closely observing how the market responds to recent regulatory changes implemented in July. These changes include tighter position limits and revised methods for calculating open interest in index futures and options contracts.

Position Limits and Open Interest

Position limits refer to the maximum exposure a trader or investor can hold in a specific derivatives contract. These are set to prevent excessive speculation or concentration of market power.

Open interest, on the other hand, indicates the total number of outstanding buy or sell positions in a contract that are yet to be settled. It serves as a key indicator of market participation and liquidity.

Possible Structural Reforms If Volumes Remain High

According to the report, if trading volumes in index options remain elevated despite these regulatory interventions, SEBI may roll out additional structural changes. Among the options being considered are shifting to a fortnightly expiry cycle or allowing expiry of only one benchmark index per fortnight.

Derivatives Market Surge Raises SEBI’s Concerns

The derivatives market in India particularly index options has witnessed a sharp rise in trading volumes over the past year. This has raised concerns around speculative activity, increased market volatility, and potential risks to uninformed retail investors.

Read More: SEBI planning campaign to discourage people who don’t understand F&O: Pandey.

Conclusion

SEBI’s possible shift to a fortnightly expiry cycle signals a broader effort to rein in excessive activity in index options. Whether such structural changes will be implemented depends on the market’s reaction to the steps already taken. Traders, brokers, and institutional participants should closely monitor developments as the regulator assesses their impact in the coming weeks.

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