BSE cuts weekly contracts for Sensex 50 and Bankex, keeps Sensex derivatives
The Bankex weekly contract has been completed as of today. This follows a recent directive from SEBI, which limits weekly expiry to only one contract per exchange.
However, the BSE chose to retain the weekly contracts of the Sensex, the 30-stock bluechip index, due to high trading volume. The move comes as part of a broader regulatory effort to curb the explosive growth of India’s derivatives market, which has grown more than 40 times in the past five years.
However, as it is a trading holiday tomorrow due to Guru Nanak Jayanti, the weekly Sensex contract expires today.
SEBI’s new rule aims to curb aggressive speculative trading associated with multiple weekly expirations, allowing only one weekly contract per exchange. As a result, BSE chose to retain weekly Sensex options given their greater popularity and trading volumes compared to Bankex.
Currently, BSE offers two main weekly contracts – Sensex and Bankex. The Sensex was eighty-five percent of the volume in the financial year ending March 2024, indicating a clear preference among traders. In line with the new law, BSE will stop both the weekly issuance of the Sensex 50 and the Bankex, while the existing contracts will continue until they expire, after which no new weekly contracts for these indices will be issued.
The notional profit of index options on BSE reached Rs 2,603 lakh crore by August 2024. The decision to finalize the weekly exit of the Sensex underscores the exchange’s strategic focus on high-volume products. By focusing on the Sensex, BSE aims to streamline its offering in response to SEBI’s mandate while ensuring continued participation from traders who rely on highly liquid Sensex contracts.
In the coming days, the NSE is also expected to decide which of its indices—Nify or Nify Bank—will be kept for weekly expiry. According to SEBI’s phased implementation plan that comes into effect from November 20, exchanges will be limited to offering weekly expirations on only one index. This regulatory measure aims to reduce concentrated trading activity on expiration days, which occurs throughout the trading day due to the large number of contracts in all indices.
Future changes may cause shifts in trading strategies, with potential spillover effects in trading patterns as participants adjust to fewer weekly expiration products.
