Why the expiry day for futures and options is chosen to be thursday? why it was not chosen to be friday or wednesday?
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I can’t think of a specific reason why NSE chose last Thursday as the expiry day. They had to choose one day when all contracts expire and they chose last Thursday 
Its NSE whose expiry of F&O contracts happens on last Thursday. It’s the respective Exchange decides when expiry of contracts should occur. Foe eg: BSE has weekly expiring options.
There isn’t a golden rule that mentions that all contracts should expire on the last Thursday of every month.
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I have a rather logical explanation, as every friday bollywood releases movies, the executives at NSE need a break to enjoy the movie on friday evening. Hence expiry is done on thursday evening.
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It is because of T+1 settlement cycle for F&O contracts. On last Thursday of the month all the contracts of index & stocks will be closed & the cash settlements will be done by Friday evening (Payin & Payout of funds), unless Friday is a trading holiday. Check in this link .
Futures settlement:-
On the expiry of the futures contracts, NSCCL marks all positions of a CM to the final settlement price and the resulting profit / loss is settled in cash.
The final settlement of the futures contracts is similar to the daily settlement process except for the method of computation of final settlement price. The final settlement profit / loss is computed as the difference between trade price or the previous day's settlement price, as the case may be, and the final settlement price of the relevant futures contract.
Final settlement loss/ profit amount is debited/ credited to the relevant CMs on T+1 day (T= expiry day).
Open positions in futures contracts cease to exist after their expiration day
Options Settlement:-
Final settlement loss/ profit amount for option contracts on Index is debited/ credited to the relevant CMs clearing bank account on T+1 day (T = expiry day).
Final settlement loss/ profit amount for option contracts on Individual Securities is debited/ credited to the relevant CMs clearing bank account on T+1 day (T = expiry day).
Open positions, in option contracts, cease to exist after their expiration day.
The pay-in / pay-out of funds for a CM on a day is the net amount across settlements and all TMs/ clients, in F&O Segment.
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great question
Hi Venu,
Weekly expiring options in BSE also expire on thursday
I wasn’t referring to Thursdays as such. I was referring to the fact that each Exchange can choose to have an expiry they want to.
Guess NSE folks dint want to ruin their Friday evening running settlements, hence Thursday
Nice research Praveen.
I came across an article, which mentions that fixed-day settlement system might have been the reason behind choosing Thursday as the expiry day -
No rolling settlement
When F&O was launched in 2000, Indian bourses were settling trades on fixed-day weekly basis. There was no concept of rolling settlement at that time. The BSE had its settlement cycle from Monday to Friday for the cash segment. This meant that all trades that took place between Monday and Thursday had to be settled (delivery of shares to the buyers and payment of cash to the sellers) on the subsequent Friday. Similarly, on the NSE, trades had to be settled on every Tuesday.
According to market veterans, the fixed day settlement system had encouraged liquidity in the market because people could buy and sell without having to pay immediately, thus encouraging speculative activity.
Because of this fixed-day settlement for the cash segment, Mondays and Fridays (due to BSE) and Wednesdays and Tuesdays (due to NSE) had witnessed excessive volatility in the stock prices and the system was fraught with default risks.
As the exchanges wanted successful F&O roll-out without defaults or additional volatility, they preferred Thursdays, which saw relatively low cash volumes in those days, experts said. Though subsequently, Indian bourses introduced rolling settlement, initially T+5 (in December 2001) and to T+3 (2002) and now to T+2 since 2003, exchanges probably did not want to change F&O settlement due to its smooth functioning. The Thursday sentiment continued for weekly contracts too.
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