Understanding the change in Bank Nifty Futures & Options expiry day – now on Friday’s

On June 6, 2023, the National Stock Exchange (NSE) vide circular no. 88/2023 announced that w.e.f. 7^th July 2023, the expiry day of Bank Nifty derivatives contracts shall stand revised to Friday instead of Thursday as current.

Details of the changes

1. All Bank Nifty Futures & Options contracts shall now expire on Friday
2. This change is effective from July 7, 2023
3. All existing contracts with Thursday expiry shall be revised to Friday expiry on July 6 EOD
4. The first Friday expiry shall be July 14, 2023
5. There shall be no other changes in the F&O contracts

Implications on existing positions

• All contracts expiring on or before July 6, 2023: Shall continue to operate as earlier with no changes
• For contracts expiring on July 13, 2023 or later: At end of day on July 6, the expiry for such contracts shall be changed in accordance with the circular – to the nearest Friday
• Contracts expiring on the last Thursday of the month: Shall be revised to the nearest Friday of the respective month – e.g., expiry of contracts expiring on Aug 31, 2023 (Thursday) shall be preponed to Aug 25, 2023 (Friday)
• Any new contracts created for trading on/after July 6, 2023: Shall be created as per the revised rules stated above. Revised contracts shall be available for trading from July 7, 2023

Reasons for the change

Much like any other financial exchange, NSE periodically reviews and updates its policies and procedures to ensure the smooth functioning of the market and to address the evolving needs of market participants.

There may be several reasons behind the change according to us, including:

• Market efficiency: By aligning the expiry days of different contracts such as Nifty, Bank Nifty, Nifty Financial or Nifty Midcap contracts, the aim might be to reduce complexity and streamline trading operations. This can facilitate better price discovery and improve overall market liquidity
• Harmonization of multiple contract cycles: This change can benefit traders who engage in multiple indices or in cross index hedging
• Risk Management: One of the primary roles is to safeguard market integrity and stability. Changing the expiry day can help mitigate risks associated with market manipulation or undue concentration of positions. By spreading out the expiry days across the week, the possibility of excessive volatility may also be addressed
• Feedback from market participants: The exchange may also consider a strong demand or consensus from valued participants such as traders, institutional investors or brokers and make adjustments accordingly

No impact on contract cycles of other contracts

While the circular announces a revision in the contract cycle of Bank Nifty F&O contracts starting July 7, there is no change in the cycles of other NSE indices – namely Nifty 50, Nifty Financial Services, or Nifty Midcap.

Below is a snapshot of the expiry days of each of the NSE derivatives indices

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