BSE proves bullet-proof after expiry day swapping with NSE

Stock exchange BSE has emerged stronger than expected after swapping its weekly derivatives expiry day with the National Stock Exchange (NSE) in September, sustaining market share gains that defied analyst predictions of a 2–3% decline, while premium volumes surged to record highs.

BSE shifted its expiry day from Tuesday to Thursday in the first week of September, while NSE's Nifty futures and options contracts now expire on Tuesday.

The strategic move paid off handsomely for BSE, which saw its market share climb 110 basis points to 28.2%, while premium average daily turnover jumped 19% to Rs 208 billion in the first week of September compared to the August average.

"The surprise was owing to BSE gaining market share on all days except for E-2 (as expected)," said Devesh Agarwal of IIFL Securities. "BSE's premium ADTO in the first week of September is Rs 208 bn – 19% higher than the August average, while its market share was up 110 bps to 28.2%."

The robust performance comes amid a broader surge in equity derivatives trading. Premium ADTO across exchanges increased to Rs 737 billion in the first week of September, marking a 14% month-on-month jump from August’s Rs 645 billion.

"The volume momentum continues in the first week of September, with premium ADTO increasing to Rs 737 bn (+14% MoM), likely driven by the change in expiry day between the two exchanges and the announcement on GST rationalisation," IIFL said.

BSE shares were trading 1.5% higher at Rs 2,354 on NSE during the day.

Market volatility has also supported volume growth. India VIX rose in August after dropping to a 15-month low in July, while low premium ratios of 15 basis points in the second quarter of FY26 to date, versus 20 basis points in the first quarter, have encouraged more trading activity.

However, the surge in retail derivatives participation is drawing regulatory scrutiny. SEBI has expressed concerns about rising retail losses in equity derivative markets and has introduced multiple measures since October 2024 to restrict excessive speculative trading in index derivatives.

"Resilience in equity derivative volumes and likely retail participation increases the likelihood of further regulatory action—creating uncertainty around earnings visibility for exchanges and related entities," Agarwal warned.

The regulatory uncertainty looms large over the exchanges. Recent comments by the SEBI Chairman on the preference for longer-tenure contracts have sparked speculation about the introduction of fortnightly or monthly contracts, potentially disrupting the current weekly expiry structure.

"Until there is regulatory clarity, earnings uncertainty remains high for exchanges and dependent models," IIFL said.

SEBI implemented a comprehensive set of measures in November last year aimed at reducing market volatility from daily index expiries. These included limiting weekly expiries to only Nifty and Sensex contracts, increasing lot sizes from Rs 5–10 lakh to Rs 15–20 lakh, and raising margins for expiry-day trading.

Despite these regulatory headwinds, the expiry-day swap has provided both exchanges with an opportunity to optimize their market positioning, with BSE’s resilient performance suggesting that strategic timing changes can effectively counter competitive pressures in India’s high-stakes derivatives market.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)