NSE to discontinue weekly index derivatives for Bank Nifty, Nifty Midcap and Nifty Financial Services

The National Stock Exchange (NSE) will phase out weekly index derivatives contracts for Bank Nifty, Nifty Midcap Select, and Nifty Financial Services, effective November 13, 18, and 19, respectively, the exchange informed in a circular on October 10.

Following these changes, the NSE will offer only the Nifty 50 index for weekly derivatives contracts. This move aligns with SEBI's recent directive, which mandates that from November 20, exchanges may offer weekly options expiries on only one index per exchange.

The market regulator SEBI implemented new measures on October 1 to fortify the index derivatives framework, aiming to safeguard investors and improve market stability.

A major reform is the restriction of derivatives contracts to a single benchmark index per exchange with weekly expiries. Additionally, exchanges must now monitor intraday positions at least four times a day, with penalties for breaches of intraday limits similar to those currently imposed at the close of the trading day.

These measures were introduced to address the speculative nature of index derivatives trading, particularly on contract expiry days.

The change comes in response to a directive from the SEBI, mandating that exchanges reduce the number of weekly options contracts available to investors to just one, effective Nov. 20.

This regulation aims to address a recent surge in options trading by retail investors, which both SEBI and the government consider a potential threat to household finances.

A SEBI report revealed that individual traders incurred net losses amounting to 1.81 trillion rupees ($21.57 billion) in futures and options over the three years leading up to March 2024, with only 7.2% of traders turning a profit.

In accordance with SEBI’s guidelines, the BSE announced on October 3 that weekly index derivatives contracts for the Sensex50 will be discontinued starting November 14, and those for Bankex will cease from November 18. These adjustments align with SEBI’s objective to strengthen the equity index derivatives market and enhance investor protection.