BSE discontinues weekly contracts for Sensex 50 and Bankex, retains Sensex derivatives

The Bankex weekly contract has been done away with from today.  This follows a recent directive from SEBI, limiting weekly expiries to just one contract per exchange.

However, the BSE has opted to retain weekly contracts for the Sensex, the 30-stock bluechip index, due to its higher trading volumes. This move comes as part of broader regulatory efforts to curb the explosive growth of India’s derivatives market, which has expanded more than 40 times over the past five years.

Nevertheless, as it is a trading holiday tomorrow on account of Guru Nanak Jayanti, weekly contract of Sensex expires today.

The new regulation by SEBI aims to curb the intense speculative trading associated with multiple weekly expiries, allowing only one weekly contract per exchange. Consequently, BSE chose to retain Sensex weekly options given their greater popularity and trading volumes compared to Bankex.

Currently, BSE offers two primary weekly derivative contracts — Sensex and Bankex. Sensex accounted for a significant eighty-five per cent of the volume in the financial year ending March 2024, indicating a clear preference among traders. In compliance with the new rule, BSE will discontinue both the Sensex 50 and Bankex weekly derivatives, while existing contracts will run their course until expiry, after which no new weekly contracts for these indices will be issued.

The notional turnover for index options on BSE reached Rs 2,603 lakh crore in August 2024. The decision to retain Sensex weekly derivatives underscores the exchange's strategic focus on higher-volume products. By focusing on Sensex, BSE aims to streamline its offerings in response to the SEBI mandate while ensuring continued participation from traders who rely on the highly liquid Sensex contracts. 

In the coming days, NSE is also expected to decide which of its indices—Nifty or Nifty Bank—will be retained for weekly expiries. As per SEBI's phased implementation plan effective from November 20, exchanges will be restricted to offering weekly expiries on just one index. This regulatory move seeks to minimize concentrated trading activity on expiry days, which currently occur on every trading day due to multiple contracts across indices.

The upcoming changes may prompt shifts in trading strategies, with potential spillover effects on trading patterns as participants adjust to fewer weekly expiry products.