Nifty Bank makes up 50% of NSE option volumes and 60% across three expiries, according to IIFL Securities.
The NSE announced that from November 20, 2024, it will discontinue weekly derivative contracts for Nifty Bank, Nifty Midcap, and Nifty Financial Services, converting them to monthly contracts instead.
This change was made to follow the market regulator’s directive to streamline weekly contracts. SEBI has instructed that there should only be one weekly expiry per index.
As a result, the Nifty 50 will be the sole index available for weekly expiry contracts. The last weekly contract for the Nifty Bank will trade on November 13, while the Midcap index and Financial Services index will see their last contracts on November 18 and November 19, 2024, respectively.
In a note from July 31, IIFL Securities pointed out that the Nifty Bank accounts for 50% of NSE option premium volumes and is the largest contract on the NSE. Its impact is noted at 60% across three expiries.
The brokerage estimates that the net impact on NSE’s full-year volumes will be around 30% to 35%.
In a recent interview with CNBC-TV18, Rajesh Baheti from Crossseas Capital Services stated that choosing Nifty as the weekly product could result in a 35% to 40% drop in NSE’s revenue, while opting for Nifty Bank could lead to a 15% to 20% decline.
But does this situation benefit NSE’s competitor, BSE?
BSE’s options tariffs are 7% lower than those of NSE, potentially accelerating market share gains for BSE. Earlier this month, BSE announced it would discontinue weekly index derivatives contracts on the Sensex 50 starting November 14, and on the Bankex from November 18, 2024.
BSE shares are currently trading 1.7% higher at ₹4,287, having reached an intraday high of ₹4,350. The stock has risen 94% so far in 2024, after hitting a record high of ₹4,395.
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