30-Aug-2023
2 mins read
The financial markets are in for a change, with the Bombay Stock Exchange (BSE) making a significant shift in the derivative contracts landscape. The exchange has announced that the expiry day for BSE Bankex derivative contracts will be moved to Mondays, effective October 16, 2023. This change comes just months after BSE relaunched its Sensex and Bankex derivative contracts in a bid to boost trading activities. The decision aims to align the market better with global standards and encourage higher volumes of trade.
The Key Shift
In a circular released on August 30, BSE revealed that the expiry day for Bankex contracts would be moved from Fridays to Mondays. The first set of these new contracts, with the modified expiry, will be generated at the end of the day on October 13 and will be available for trading from October 16. However, this change doesn’t affect the Sensex derivative contracts, which will continue to expire on Fridays.
Aligning with Market Peers
The move by BSE follows a similar adjustment by the National Stock Exchange (NSE), which also shifted the expiry day for its Nifty Bank future & options contracts to Friday from Thursday, effective from July 7. As exchanges strive for a more seamless and efficient trading experience, these changes appear to be part of a broader industry trend to align with market needs and international standards.
Impact on Market Share and Trading Volume
According to a recent note from HDFC Institutional Equities, BSE’s market share in the equity derivatives segment has shown remarkable growth. It rose from nil in April to 3.4% in August, and the expiry day market share has reached 11% without any liquidity enhancement scheme (LES). The note predicts that BSE’s market share in derivatives is expected to reach around 10% by Q4 FY24. It credits this to the onboarding of large member brokers, new weekly index contracts, and an increase in active traders.
Future Outlook and Ratings
HDFC Institutional Equities believes the new changes under BSE’s new management are bearing fruit. They project a compound annual growth rate (CAGR) of 19% in revenue and 25% in earnings per share (EPS) over FY 23-26. The firm has also upgraded BSE to a ‘BUY’ rating with a target price of Rs 1,230, reflecting a promising outlook for the exchange.
With these changes, the BSE aims to offer more flexibility and options to traders, thereby making the derivatives market more appealing for both institutional and retail investors. The shift in expiry day for BSE Bankex contracts could be a game-changer, potentially attracting higher trading volumes and bolstering market share. Only time will tell if this strategic move will achieve its intended objectives, but the early indicators are promising.