WHY THE PROPOSED CHANGE TO OPTION EXPIRY RULES ARE IMPORTANT.

    The regulator has been consulting the exchanges about a proposed tweak to our existing equity and index options expiry rules. When a trader buys an option, he will be required to choose whether the option is for excise on expiry or not. This case specifically pertains to in-the-money options and the entire anomaly arises due to the different system of imposing securities transaction tax (STT) when an in-the-money option is left for expiry on the expiry day. To understand this proposed modification in rules, let us first understand the concept of in-the-money options in greater detail and why this discrepancy in the calculation of STT becomes so important.