Comment on STT Trap - Options Expiry - NSE BSE MCX-SX
commented on
22 Feb 2017, 04:54 PM
I highly appreciate your efforts. Maybe, even this is an understatement. I missed mentioning this point earlier. I had also signed the petition earlier.
Kindly note that what I am saying now is NEW, very NEW, and with this and your great help this problem would be solved.
This issue is NOT due to Finance Ministry, but due to NSE’s mistaken definition of Settlement Price on Options expiry / exercise. I request you to please read this carefully.
2. Settlement Price of options on exercise
https://www.nseindia.com/products/content/derivatives/equities/settlement_price.htm
Options Contracts on Index and Individual Securities
Final Exercise Settlement
Closing price of such underlying security (or index) on the last trading day of the options contract.
Anyone would note that this is the settlement price of Futures and certainly not Options! If one goes by this definition, every ITM options holder should be settled with the closing price of the underlying on expiry / exercise!
In the example of the stt petition,
Options Contract Nifty 8600 CE
No. of held 3000 lots, or 225,000
Settlement Price –
Closing Price of the underlying 8602.75 (Nifty in this case)
Settlement Value 225,000 x 8602.75 = 193,56,18,750
That is a whopping 193 Crores! If one goes by the NSE definition of settlement price, NSE should pay this 193Cr to the options contract holder in this example ! So that proves that settlement price definition is incorrect.
How is the STT related to all this? STT is 0.125% of the settlement price! To be fair, NSE should correct this, and reimburse the excess STT collected due to its error.
I do hope this is clear now, and request your great help to kindly take it up with NSE and solve this anamoly.