'Live and let live' policy

By sticking to two expiry days, Sebi has chosen to spread speculative risk and encourage competition

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The Securities and Exchange Board of India's (Sebi) latest mandate on having two expiry days for stock exchanges makes one thing clear — it wants to encourage healthy competition.

More importantly, the regulator has taken the tricky call of deciding that while allowing expiries on all days will lead to hyperactivity that could hurt investor protection and market stability, having it on a single day will increase concentration risk. "In the multi-exchange framework, spacing out of expiry days through the week reduces concentration risk and provides an opportunity to stock exchanges to offer product differentiation to market participants," the circular issued on Monday said.

On the face of it, the market regulator is mandating a predictable trading calendar and spreading the expiry day-specific speculative surges through the week. This has been a concern, especially since retail enthusiasm in derivatives market has not come down despite the strict guidelines.