NSE’s move of shifting Bank Nifty’s Futures and Options (F&O) expiry from Thursday to Friday has surprised traders. The changes will be effective from the trade date of Friday, July 7, 2023; accordingly, all existing contracts with Thursday expiry will be revised to Friday by the end of the day on July 6, 2023. The first Friday expiry will be on July 14, 2023, according to NSE. With this change, NSE will now have an F&O expiry on every day of the week except Monday, with effect from the week starting July 9. There is the Nifty Financial expiry on Tuesday, Nifty Midcap Select on Wednesday, Nifty 50 on Thursday and now Bank Nifty on Friday.
Earlier last month, BSE also changed the expiry day of Sensex and Bankex monthly, weekly and long-dated futures and options contracts to Fridays from Thursdays. Analysts believe that NSE has taken this decision to counter BSE while noting that changing the expiry day alone won’t increase the attractiveness of Bank Nifty as transaction charges will also play a significant role. Nifty 50 and Bank Nifty take cues from each other, especially during expiry days, resulting in heightened volatility, the move may help reduce volatility.
Different expiry days will help in reducing volatility
“Though Bank Nifty is a thematic index while Nifty is a broad-based index, and though both differ in terms of volatility and price ranges, they are often traded in tandem, with each taking cues from the other, especially during expiry day fluctuations. However, once expiry days become different, it is possible that such a link might diminish. This move is more significant than any of the other similar changes wrt expiry days brought in for Finnifty or that of BSE indices etc, as Nifty and Bank Nifty constitute the lion’s share of derivative volumes,” said Anand James, Chief Market Strategist at Geojit Financial Services. He further said that one could argue that too much may not be good, as now one would have to spare the heightened allocation of resources in terms of attention, research, time etc. to yet another day.
Same expiry day will make it easier for investors to adjust their trading positions
“As NSE looks to gain a competitive advantage over BSE, the Nifty Bank expiry has been shifted to Friday. This will not impact Nifty Bank traders in any way but if both BSE & NSE had the same day as the expiry day would have surely made it easier for investors to remember and accordingly adjust their trading positions,” said A R Ramachandran from Tips2trades.
Brokerages, exchange and government will gain from different day expiry
“Traders will utilize their capital in a more efficient manner if Nifty and Bank Nifty expire on different days; brokers will earn more brokerages, exchange and government will earn more transaction charges and STT,” said Mitesh Karwa, Research Analyst at Bonanza Portfolio Ltd.