What SEBI’s Expiry Day Rule Means for MSEI Investors

According to news reports, investors in the Metropolitan Stock Exchange of India (MSEI) are facing growing uncertainty after the Securities and Exchange Board of India (SEBI) changed the expiry day rules for weekly index options. With limited expiry days and a dominant market share held by NSE and BSE, investors are now questioning the future potential of their investment in MSEI.

Background on SEBI’s Expiry Day Regulation

In October last year, SEBI introduced a circular stating that each exchange would be permitted to offer weekly index options expiring on only one day of their choice. This was seen as a strategic opportunity by new or smaller exchanges like MSEI to carve out a niche by choosing non-conflicting expiry days. However, a revised circular from SEBI last month altered this framework and allowed a maximum of 2 expiry days per week across all exchanges.

This new rule changes the game for MSEI. With only 2 expiry days permitted, the exchange will have to compete directly with either NSE or BSE, both of which have already secured a commanding presence in the market.

MSEI Investors Caught in a Bind After SEBI’s Rule 

According to the news reports, executives from 2 of the 4 broking firms that invested in MSEI have expressed concern over the revised regulation. When the original investments were made, it was expected that MSEI could offer its own expiry day and stand out from the major players. Now, with the new rule in place, that expectation has been upended.

Although investors are currently not planning to sell their stake, they are adopting a cautious stance. 

Competitive Landscape and Market Share

According to NSE data, the National Stock Exchange held an 80% market share in equity options based on a three-month rolling average as of April 30. The remaining market was largely captured by BSE. MSEI’s limited footprint, particularly in equity and derivatives segments, makes the competition far more intense in the current scenario.

The new rule is expected to make it harder for MSEI to attract trading volumes and gain relevance in the crowded exchange space. Investors had hoped to leverage the unused expiry days to offer differentiated products. Now, their derivative contracts may need to compete head-to-head with those of NSE and BSE, reducing the likelihood of success.

Read More: SEBI Sets Tuesday and Thursday Expiry for Equity Derivatives Across Exchanges. 

Recognition and Regulatory Standing

MSEI faces another important milestone in September this year, the annual renewal of its recognition by SEBI. Unlike NSE, BSE, and other exchanges, which have received permanent recognition, MSEI continues to operate under yearly renewals. The reasons behind this remain unclear as both SEBI and MSEI have not responded to queries.

MSEI currently has approvals to operate in equity, equity derivatives, debt, currency derivatives and interest rate futures. However, activity in most segments remains negligible, except in currency futures.

Shareholding Pattern and Trading Activity

As of March 31, 2025, ten trading member banks jointly held 10.49% of MSEI. These include prominent names such as State Bank of India, HDFC Bank, Axis Bank, Bank of Baroda and Union Bank of India. Other significant stakeholders include MCX with 5.53% and Nemish Shah, co-founder of Enam Holdings, with 1.62%.

In April, MSEI recorded a turnover of ₹2,260 crore in currency futures. This is a small figure when compared to NSE’s turnover of ₹74,328 crore in the same segment. Other segments such as equity, equity derivatives and interest rate futures witnessed no trading activity during this period, as per SEBI data.

Conclusion 

According to reports, investors are now taking a wait-and-watch approach. While no immediate divestment is planned, the lack of differentiation due to the expiry day limitation could pose a significant barrier to MSEI’s revival. Without exclusive expiry slots, MSEI's attempt to stand out in the derivatives segment appears to have lost momentum.

With the next recognition renewal due in September and continued underperformance in most segments, the path ahead remains uncertain for both the exchange and its backers.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

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