The National Stock Exchange (NSE) released a circular on Tuesday, June 6, announcing a revision of the expiry day of Futures and Options (F&O) Contracts of Nifty Bank (BANKNIFTY). 

Currently, the weekly expiry of BANKNIFTY F&O contracts is set to Thursday of every week. Starting July 7, the weekly expiry of all Nifty Bank derivative contracts will occur on Friday of every week.

These contracts’ monthly expiry occurs on the last Thursday of the month. As per the new circular, all monthly contracts will expire on the last Friday of the contract month.

The first Friday expiry date will be July 14. This means that all existing contracts with Thursday expiry will be revised on July 6 end of the day. If the Friday of the week or the last Friday of the month is a trading holiday, the previous trading day will be taken as the expiry day. 

Battle of the Bourses

The NSE circular comes in response to the expiry revision of Bankex and Sensex derivative contracts by the Bombay Stock Exchange (BSE). A positive response from traders and investors towards the revised Nifty Financial Services (FinNifty) expiry also influenced the decision. 

In a move to boost derivative trading, BSE had earlier relaunched Bankex and Sensex’s derivative contracts with a new expiry and reduced lot size. The weekly and monthly expiry of the contracts was changed from Thursday to Friday, effective from May 15. 

The lot size was reduced from 15 to 10 for Sensex contracts and 15 from the previous 20 for Bankex. NSE also reduced the lot size of Nifty Bank F&O contracts to 15 from 25. This change will be applicable from the new Friday expiry. The lot size of derivatives on other indices remains unchanged.

In the latest weekly expiry, BSE reported a four-fold jump in turnover for its relaunched derivatives contracts from the previous week to Rs 69,422 crore. Although, this number remains a fraction of the volume traded on the NSE, which is upwards of Rs 250 trillion. NSE holds a dominating position in the Indian stock market and wishes to continue to do so.

New Expiry Calendar for Derivative Traders 

Contract	Stock Exchange	Expiry
Nifty Financial Services	NSE	Tuesday
Nifty Midcap 50	NSE	Wednesday
Nifty	NSE	Thursday
Sensex	BSE	Friday
Nifty Bank	NSE	Friday
Bankex	BSE	Friday

Benefits of the Revisions

The new Friday expiry will give traders more time to trade, assess market conditions, and manage risks effectively before the expiry. Additionally, funds and option writers will be able to collect higher premiums and boost derivative volumes, all thanks to the increased trading day.  

Market participants say that the new reduced lot sizes might increase volumes, but they would watch how trading strategies evolve.

But, the expiry and lot size are not the only determinants of attractiveness for derivative traders. Associated transaction charges also play a significant role, especially considering the appeal of BSE Sensex F&O contracts. 

The intraday volatility will rise, but the overnight risk that traders previously carried over the weekend will fall. Week-on-week volatility is expected to decrease since the Thursday expiry will only be reserved for Nifty contracts, and the components of Bank Nifty will be more active on Friday’s expiry.  

These changes will significantly contribute to the overall growth and stability of the market and benefit market participants.