NSE to Phase Out Weekly Index Derivatives for Bank Nifty, Nifty Midcap Select, and Nifty Financial Services

The National Stock Exchange intends to phase out weekly index derivatives contracts for Bank Nifty, Nifty Midcap Select, and Nifty Financial Services. They will be available up to November 13, 18, and 19, respectively. A circular was issued on October 10 stating that when those dates pass by, the NSE will only be offering the Nifty 50 index for weekly derivatives trading.

This move remains in line with the newly issued directive by SEBI, whereby it notified that from November 20 onwards, exchanges are permitted to provide weekly options expiries for just one index. These guidelines were introduced by SEBI on October 1 to strengthen the index derivatives framework as an effort to enhance the protection of investors and create more stable market conditions.

The restrictions for all weekly expiry derivatives contracts should be capped to just one benchmark index per exchange. In addition, the exchanges will now have the duty of monitoring intraday positions at least four times a day; breaches will attract similar penalties as those offered at the end of the trading day. The reforms thus will check speculative trading, especially during contract expiries.

This regulatory fine-tuning reflects also the concern of the rising turnover in options trading by retail investors, which SEBI and government authorities feared would be a threat to family finances. Recently, a SEBI study concluded that the individual traders had lost ₹1.81 trillion ($21.57 billion) collectively in futures and options trading during the last three years when only 7.2% of participants could come out with some profit.

Besides, the BSE has announced the withdrawal of weekly derivatives contracts for the Sensex 50 from November 14 and for Bankex from November 18, as a sequel to SEBI's guidelines. BSE will continue trading only in weekly contracts based on its benchmark Sensex index. These measures are directed at strengthening the equity index derivatives market besides boosting investor protection.

Members may prepare the applicable contract.gz or MII contract (NSE_FO_contract_ddmmyyyy.csv.gz) and spread (NSE_FO_spdcontract_ddmmyyyy.csv.gz) files in their trading applications for use prior to the trading commencing. These files are placed on the Extranet server at faoftp/faocommon or alternatively accessed through the link below on the NSE website at: https://www.nseindia.com/all-reports-derivatives.