The Securities and Exchange Board of India (SEBI) is working on a consultation paper that could reshape India’s derivatives market by phasing out weekly F&O (Futures & Options) expiries as per report published in CNBC TV18. The move, if implemented, will shift the market back toward monthly expiries (or longer-tenure contracts), a significant departure from the high-frequency expiry system that dominates today. This is not less than a breaking and shocking news for those chunk of Investors and Traders who speculates and use unethical means of trading using massive cash and misusing technologies in their favour.
The proposal comes amid rising concerns about excessive speculation, expiry-day volatility, and retail investor losses. The regulator is also focused on curbing market manipulation, improving transparency, and ensuring fair play across exchanges.
Key Proposals Under Consideration
- Ending Weekly Expiries
- SEBI aims to gradually eliminate weekly F&O expiries.
- Only monthly or longer-tenure contracts will remain, with a defined glide path for transition to avoid disruption.
- Same-Day Expiry Norms Across Exchanges
- SEBI is considering harmonizing expiry days across exchanges, ensuring uniformity in settlement.
- This would prevent volume shifts between NSE and BSE caused by different expiry calendars.
- Recent Regulatory Moves That Set the Stage
- Exchanges are now restricted to one weekly benchmark index contract each.
- Expiry days are standardized: all equity derivatives must expire on a Tuesday or Thursday.
- Exchanges must seek SEBI approval before making any expiry or settlement changes.
Why SEBI is Doing This
- Curbing Excessive Speculation
Weekly expiries attract traders looking for quick profits, leading to expiry-day hyperactivity and sudden price swings. - Retail Investor Protection
SEBI has repeatedly highlighted that 90% of retail investors lose money in F&O trading. Weekly expiries worsen the risk exposure by pushing traders into short-term bets. - Reducing Market Manipulation
- Weekly expiry contracts concentrate massive trades on single days.
- This clustering creates opportunities for price manipulation by large players using algorithmic and high-frequency trading.
- Longer expiry cycles make it harder to distort prices with short bursts of capital.
- Avoiding Clustering of Risk
Expiry-day volumes are often disproportionate to regular trading days, creating distortions in liquidity, margins, and volatility. - Learning from Global Cases
Market manipulation in derivative trading is not new. For example, Jane Street, a U.S. trading firm, was fined ₹5,50 crore by SEBI in 2024 for alleged manipulation of options contracts on Nifty Bank expiry. Internationally, the U.S. Commodity Futures Trading Commission (CFTC) has imposed multi-million-dollar penalties on firms like JPMorgan, Citadel, and DRW for manipulative trading strategies such as spoofing and cornering derivative positions. These global precedents strengthen SEBI’s case for stricter expiry reforms.
Likely Impact on Different Stakeholders
1. Exchanges (NSE & BSE)
- Revenue hit: Weekly F&O contracts contribute heavily to trading volumes. Ending them could reduce transaction fee income.
- Market share shift: Currently, BSE benefits from Tuesday expiries. If expiry days are standardized, BSE could lose its competitive edge.
- Analysts expect a 5–10% drop in BSE’s earnings if weekly expiries vanish.
2. Brokers
- Brokers thrive on high-frequency F&O volumes.
- Lower turnover could reduce brokerage income, although long-term investors may prefer more stable derivative structures.
3. Retail Traders
- Fewer opportunities for quick speculative trades.
- Reduced risk of expiry-day whipsaws.
- Retail will need to adapt strategies toward longer-term contracts.
4. Foreign Portfolio Investors (FPIs) & Foreign Institutional Investors (FIIs)
- Reduced scope for manipulation: FPIs and FIIs often bring thousands of crores of capital into expiry-day strategies, sometimes triggering extreme volatility.
- With fewer expiry windows, it will be harder for them to engineer large intraday swings to their advantage.
- Longer-tenure contracts demand more capital commitment and discourage “hit-and-run” strategies.
- This could level the playing field for domestic institutional and retail investors.
5. Overall Market Dynamics
- Expiry days may lose their “event” status.
- Intraday volatility could reduce, but open interest may rise in longer-tenure contracts.
- A healthier derivatives ecosystem may emerge, aligned more with hedging needs than speculation.
Which Stocks Will Be Most Affected?
The companies most directly affected will be those that depend on trading volumes and brokerage income. BSE Ltd., which has seen record profit growth due to its rising F&O segment, may see its earnings impacted if volumes decline. Similarly, brokerage firms such as Angel One, IIFL Securities, Motilal Oswal, Geojit Financial Services, and JM Financial could experience pressure on commission income. Market infrastructure institutions like CDSL and NSDL may also face moderation in transaction-linked fees. In short, while revenue-sensitive stocks in the financial services space may experience near-term earnings headwinds, the reform can help create a more stable market environment in the long run.
📊 Fact Box: Stocks Directly Impacted by Reduced F&O Volumes
Exchanges & Market Infrastructure:
- BSE Ltd. – Heavily reliant on derivatives volume growth.
- NSE Ltd. (unlisted, IPO-bound) – F&O is its largest revenue contributor.
- CDSL & NSDL – May see moderation in fees linked to turnover.
Brokerage Firms:
- Angel One – One of the largest retail brokers, highly volume-driven.
- IIFL Securities – Brokerage and distribution revenues could face pressure.
- Motilal Oswal Financial Services – Broking business sensitive to F&O activity.
- JM Financial – Capital markets and brokerage business tied to derivative turnover.
- Geojit Financial Services – Retail-focused broker, impacted by reduced option trades.
📌 Key Insight: These revenue-sensitive stocks may see short-term earnings pressure if weekly expiries are phased out. However, as markets stabilize, retail inflows through mutual funds and growth-oriented stocks can offset the loss and support long-term sector growth.
Market Stability and Retail Flows
In the short term, Indian markets may experience fluctuations and volatility as traders and institutions adjust to the new framework. But in the long run, this reform is expected to bring more stability. Retail investors, who often lose money in high-frequency expiry trades, are likely to reallocate capital into mutual funds (MFs), SIPs, ETFs, and fundamentally strong growth-oriented stocks. This will strengthen India’s capital markets by encouraging disciplined, long-term wealth creation rather than speculative churn.
Outstanding Questions
- Will SEBI allow a fortnightly model as a middle path, or strictly move to monthly contracts?
- What happens to single-stock options — will they follow the same expiry rules?
- How quickly will the glide path be implemented — one year or staggered over multiple years?
- Will exchanges or brokers be compensated with new product approvals to offset revenue losses?
Conclusion
SEBI’s consultation paper on phasing out weekly F&O expiries represents one of the most significant reforms in India’s derivatives market since its inception.
- For retail investors, it could mean protection from frequent expiry-day losses.
- For exchanges and brokers, it implies short-term revenue pain but potential for longer-term market stability.
- For FPIs and FIIs, it curtails the ability to dominate expiry days with massive capital flows, making markets fairer.
The regulator’s message is clear: derivatives should serve as risk management tools, not speculative playgrounds. If executed with a smooth transition plan, this reform could strengthen India’s market structure, reduce volatility, and enhance investor confidence.
Disclosure: The author is not a SEBI-registered investment advisor but has over 15 years of deep knowledge and experience in Indian capital markets. The above article is for informational purposes only and should not be considered as investment advice.
