BSE, NSE to give ‘do not exercise’ option in equity derivatives
BSE and NSE have decided to provide trading members the option to not exercise certain options contracts in the equity derivatives segment
New Delhi: Providing more leeway, leading exchanges BSE and the National Stock Exchange (NSE) will provide trading members the option to not exercise certain options contracts in the equity derivatives segment.
The new facility, to be provided on index options and stock options contracts, will begin from 31 August, 2017. The move will help brokers and traders.
Currently, all open long positions across ‘in-the-money’ options contracts are automatically exercised and cash settled after end of trading session on expiry day.
In separate circulars, the exchanges said that buyer of option can indicate a choice not to exercise in-the-money open long positions on the expiry day.
In ‘in-the-money’ category, option contracts can be exercised in a bid to purchase its underlying share for lower than the prevailing market price or to sell its underlying stock for higher than the current market price.
Under the new system, trading members will have to provide response as ‘N’ against position which they do not want to exercise. They will have 30 minutes time window to submit ‘do not exercise’ option. This window would be available from 4:30pm to 5pm on the day of expiry of these contracts.
It would be applicable for monthly as well as weekly contracts or as per timings as announced from time to time, the exchanges said.
If members do not provide any response within the cut-off time, or if the information provided by member is incomplete, then such client-contract-long positions would be automatically exercised, they added.
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