F&O Trading: All Equity Derivatives On Exchanges To Expire On Either Tuesday Or Thursday, Sebi Mandates

The Securities and Exchange Board of India (Sebi) on May 26, via a circular, introduced new regulations to standardise the expiry days for equity derivatives (Futures & Options, or F&O) contracts. In the circular the regulator has mandated that all equity derivatives contracts on stock exchanges will expire on either Tuesday or Thursday every week.

While Sebi has set uniform expiry days for all contracts, exchanges will continue to be allowed to offer one weekly benchmark index options contract on their chosen day, which can be on either Tuesday or Thursday.

For other equity derivatives, including benchmark index futures, non-benchmark index futures/options, and single-stock futures/options, Sebi has mandated that these contracts will now have a minimum tenor of one month. The market watchdog also said that the expiry for such contracts will be in the last week of every month on their chosen day, either last Tuesday or last Thursday.

As a part of the new rules, any exchange wishing to modify its existing settlement day will now need to obtain prior approval from Sebi. The circular stated, "Exchanges will now seek prior approval of Sebi for modifying the settlement day of their derivatives contracts from the one which has been existing."

Sebi has directed the stock exchanges to implement the new expiry day framework by submitting their compliance proposals by June 15, 2025. The exchanges and clearing corporations will also be required to update their systems, processes, and relevant bye-laws, rules, and regulations to ensure the smooth implementation of the new structure.

Why The Need For A New Framework

In a multi-exchange setup, spreading out expiry days throughout the week helps reduce concentration risk and gives exchanges a chance to offer more differentiated products to traders, Sebi said in its circular. However, it added, “Too  many  expiry  days  has  the  potential  to revive expiry  day hyperactivity  which  could  jeopardize investor  protection  and market stability.”

To address this issue, Sebi had floated a consultation paper on March 27, 2025 to gather public feedback. After reviewing the responses and further discussing the matter with the Secondary Market Advisory Committee (SMAC), Sebi decided to make the above-mentioned changes.