Ministry : Ministry of Finance (SEBI)

Review of Calendar Spread margin benefit in Single stock derivatives on expiry d

Subject : ministry of finance

Calendar Spread Margin Benefit for Single Stock Derivatives on Expiry Day

This SEBI circular introduces a significant regulatory change by removing calendar spread margin benefits for single stock derivatives on the expiry day of one of the legs, aligning the framework with existing rules for index derivatives and addressing risk management concerns raised by market participants and the Secondary Market Advisory Committee.

Key Points

• SEBI has decided that offsetting positions across different expiries (calendar spread) in single stock derivatives will no longer qualify for margin benefit on the day a contract expires.
• The restriction applies only to calendar spreads involving the nearest expiry; spreads between non-expiring months (e.g., next month vs. far month) will continue to receive margin offsets.
• The change is effective three months from February 5, 2026, giving exchanges and clearing corporations time to update systems and regulations.
• This aligns single stock derivative treatment with index derivatives, where such benefits are already withdrawn on expiry day to mitigate post-expiry margin risks.
• Stock exchanges and clearing corporations are directed to amend relevant rules, bye-laws, and systems to implement the new framework.
• The move aims to protect investors and market integrity by reducing the risk of sudden margin spikes and unmanaged exposure after one leg of a spread expires.

Aligning Derivatives Risk Framework: SEBI Tightens Calendar Spread Rules on Expiry Day

SEBI has extended its existing index derivatives risk controls to single stock derivatives by removing calendar spread margin benefits on the expiry day of near-month contracts. This step, driven by input from trading members and the Secondary Market Advisory Committee, prevents potential margin shortfalls and unmonitored exposure when one leg of a spread automatically expires. By requiring full margin for expiring-month spreads, the regulator ensures greater market stability and risk preparedness. The three-month implementation window allows market infrastructure institutions to adapt systems and inform participants, reinforcing a proactive approach to derivatives market regulation.