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In an effort to strengthen fairness index derivatives framework for elevated investor safety and market stability, SEBI in its round dated October 10 intimated the cessation of weekly index possibility contracts in 3 of the indices together with Nifty Financial institution (BANK NIFTY)
The opposite two contracts whose weekly index choices shall be discontinued are Nifty Midcap Choose (MIDCPNIFTY) and Nifty Monetary Providers (FINNIFTY).
Nonetheless, the final buying and selling date and the final weekly index possibility expiry obtainable for these indices shall be as follows:
For the Nifty Midcap Choose and Nifty Monetary Providers, the expiry or the final buying and selling date might be November 18 and November 19, respectively.
As talked about within the SEBI round, every Trade could present derivatives contracts for less than one in every of its benchmark index with weekly expiry and shall be efficient from November 20, 2024., i.e. from this date weekly derivatives contracts would solely be obtainable on one benchmark index for every Trade. Accordingly, Trade will proceed to make weekly index choices obtainable solely on the Nifty 50 Index (NIFTY), added the round.
Anand Rathi’s Jigal Patel stated, “At the moment is the final Financial institution Nifty’s weekly choices expiry, and from the subsequent expiry onwards, which might be a month-to-month expiry, a number of results available on the market are anticipated. First, volatility is anticipated to lower because the frequent hypothesis related to weekly choices will subside, bringing a extra secure buying and selling surroundings. Moreover, the general Futures and Choices (F&O) quantity could shrink barely with out the common turnover from weekly Financial institution Nifty choices.”
A optimistic facet of this shift is that the Nifty index might expertise better stability, as main heavyweight shares like ICICI Financial institution, HDFC Financial institution, and SBI—which play a major position in each the Financial institution Nifty and Nifty indices—may have decreased short-term speculative strain, resulting in doubtlessly steadier efficiency in these key shares, he added.
Atul Parakh, CEO of Bigul in the meantime echoing an identical view held that-
– Buying and selling volumes are anticipated to shift predominantly in the direction of month-to-month expiries and different merchandise. Given Financial institution Nifty’s distinctive traits – a smaller constituent base and decrease lot measurement in comparison with Nifty – the change will notably scale back short-term volatility and speculative buying and selling alternatives. This aligns with SEBI’s regulatory intent to discourage informal buying and selling.
The staggered implementation beginning November 20 ought to stop systemic shocks whereas facilitating a clean transition.
What the change means for merchants?For merchants, this implies adapting methods in the direction of longer-term positions and exploring month-to-month contracts. The reform is anticipated to boost market stability and scale back extreme hypothesis, although it might initially impression liquidity within the banking sector derivatives section, added Parakh.
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