In order to strengthen equity index derivatives framework for increased investor protection and market stability, SEBI in its circular dated October 10 intimated the cessation of weekly index option contracts in 3 of the indices including Nifty Bank (BANK NIFTY)

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The other two contracts whose weekly index options shall be discontinued are Nifty Midcap Select (MIDCPNIFTY) and Nifty Financial Services (FINNIFTY).

However, the last trading date and the last weekly index option expiry available for these indices shall be as follows:

For the Nifty Midcap Select and Nifty Financial Services, the expiry or the last trading date will be November 18 and November 19, respectively.

As mentioned in the SEBI circular, each Exchange may provide derivatives contracts for only one of its benchmark index with weekly expiry and shall be effective from November 20, 2024., i.e. from this date weekly derivatives contracts would only be available on one benchmark index for each Exchange. Accordingly, Exchange will continue to make weekly index options available only on the Nifty 50 Index (NIFTY), added the circular.

Anand Rathi's Jigal Patel said, "Today is the last Bank Nifty's weekly options expiry, and from the next expiry onwards, which will be a monthly expiry, several effects on the market are anticipated. First, volatility is expected to decrease as the frequent speculation associated with weekly options will subside, bringing a more stable trading environment. Additionally, the overall Futures and Options (F&O) volume may shrink slightly without the regular turnover from weekly Bank Nifty options."

A positive aspect of this shift is that the Nifty index could experience greater stability, as major heavyweight stocks like ICICI Bank, HDFC Bank, and SBI—which play a significant role in both the Bank Nifty and Nifty indices—will have reduced short-term speculative pressure, leading to potentially steadier performance in these key stocks, he added.

Atul Parakh, CEO of Bigul meanwhile echoing a similar view held that-

- Trading volumes are expected to shift predominantly towards monthly expiries and alternative products. Given Bank Nifty's unique characteristics - a smaller constituent base and lower lot size compared to Nifty - the change will notably reduce short-term volatility and speculative trading opportunities. This aligns with SEBI's regulatory intent to discourage casual trading.

The staggered implementation starting November 20 should prevent systemic shocks while facilitating a smooth transition.

What the change means for traders?
For traders, this means adapting strategies towards longer-term positions and exploring monthly contracts. The reform is anticipated to enhance market stability and reduce excessive speculation, though it may initially impact liquidity in the banking sector derivatives segment, added Parakh.