The National Stock Exchange (NSE) will shift the expiry of Bank Nifty derivatives contracts from Thursday to Friday, after smaller rival BSE did so earlier.
The change, effective July 7, will apply to both weekly and monthly futures and options (F&O) contracts of the widely traded banking sector index.
The first Friday expiry will be on July 14, 2023.
NSE dominates the derivatives segment.
However, BSE has started receiving traction after it relaunched its Sensex and Bankex derivatives contracts with reduced sizes and Friday expiry.
Shares of BSE fell 1.7 per cent on Tuesday to close at Rs 567.
“This is to counter BSE’s move of tweaking the lot size and expiry day of options contracts which had gained popularity due to low charges.
"From the investor-trader’s perspective, one of the critical points of consideration is volume, and NSE is still placed much better in market share than BSE, and hence, is most likely to continue its dominance,” said Rajesh Palviya, SVP - Technical and Derivatives Research at Axis Securities.
BSE, in the latest weekly expiry, reported a turnover of Rs 69,422 crore for its relaunched derivatives contracts, indicating a four-fold jump from the previous week.
This is still a fraction of NSE’s volume, which is upwards of Rs 250 trillion.
“The NSE’s decision to shift the expiry of Bank Nifty to Friday can be viewed from two perspectives.
"Firstly, BSE F&O contracts, which already expire on Friday, have gained popularity among traders due to lower charges compared to NSE.
"To counter this competition, NSE introduced the idea of shifting the expiry day. Secondly, NSE’s previous successful experiment with the FinNifty’s new expiry day may have influenced this decision.
"However, it’s important to note that expiry alone may not be the sole factor determining attractiveness; transaction charges will also play a significant role, especially considering the appeal of BSE Sensex F&O contracts,” said Santosh Meena, head of research, Swastika Investmart.
NSE’s Nifty Financial Services (FinNifty) F&O contracts expire on Tuesday.
NSE hasn’t made any changes to the flagship Nifty50 F&O contracts yet.
Market players said the different expiry for Nifty and Bank Nifty derivatives contracts could weigh on volumes, but they would watch how trading strategies evolve.
“The volatility, particularly in Nifty, is expected to come down by roughly 20-22 per cent as the components of Bank Nifty will be more active on Friday’s expiry than Thursday’s weekly expiry.
"At the same time, the monthly expiry, which includes stocks of the bank, will be settled last Thursday.
"Hence, there are chances of more or less muted monthly Bank Nifty expiry,” said Palviya.
NSE has said the change in expiry day follows market feedback.
BSE refused to comment on NSE’s move.
BSE had earlier said that the Friday expiry would provide multiple additional trading opportunities and strategies for the market participants.