In a significant shift for traders, the National Stock Exchange (NSE) has announced the discontinuation of weekly index derivatives. This will apply to Bank Nifty, Nifty Midcap Select, and Nifty Financial Services.
Let us explore what changes it will bring to your weekly index derivatives!
NSE Update on Index Derivatives: Essential Info on Weekly Changes
- The NSE is all set to stop the weekly index derivatives for Bank Nifty, Nifty Midcap Select, and Nifty Financial Services starting November 13, 18, and 19, respectively.
- After these changes, the Nifty 50 will be the only index available for weekly derivatives contracts.
- From November 20, exchanges must allow weekly options only for one index.
- Exchanges will check intraday trading positions at least four times a day to ensure compliance.
- If traders breach intraday limits, they will face penalties similar to those imposed at the end of the trading day.
- These rules aim to protect investors and create a more stable trading environment.
This decision is in line with a recent directive from the Securities and Exchange Board of India (SEBI).
Effective Dates:
- Bank Nifty options will be discontinued after November 13.
- Nifty Midcap Select on November 18.
- Nifty Financial Services on November 19.
SEBI’s New Measures to Enhance Market Stability
On October 1, SEBI implemented new measures to strengthen the index derivatives framework. These changes aim to protect investors and promote market stability. One of the key reforms is to restrict the derivatives contracts to a single benchmark index per exchange with weekly expirations.
Additionally, exchanges must now monitor intraday positions at least four times daily. They can impose penalties for any violations of intraday limits. These would be similar to those currently applied at the end of the trading day.
These measures aim to tackle the speculative nature of trading in index derivatives, especially on contract expiry days.
Response to Increased Retail Investor Activity
The National Stock Exchange (NSE) is making changes in Index derivatives in response to more people trading in the market. Starting November 20, the Securities and Exchange Board of India (SEBI) has directed that investors can only have one weekly options contract.
This decision comes after seeing a rise in options trading by regular investors.
Now, how does this pose a risk?
SEBI and the government believe this could put household finances at risk.
A recent SEBI report showed that individual traders lost a total of 1.81 trillion rupees in futures and options trading over three years up to March 2024. Shockingly, only 7.2% of these traders made a profit.
BSE Announces End of Weekly Index Contracts
NSE to discontinue weekly index option contracts on Bank Nifty after November 13.
Following SEBI’s guidelines, the Bombay Stock Exchange (BSE) also announced on October 3 that it would stop weekly index derivatives contracts for the Sensex50. This shall begin on November 14.
Additionally, contracts for Bankex will end on November 18.
These changes aim to make the equity index derivatives market stronger and provide better protection for investors.
This shift is part of a larger plan to stabilise the market and protect investors. By reducing the number of weekly options contracts, exchanges want to lower speculative trading.
Keep following for more updates on the stock market!
Source: Mint
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Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.