SEBI to partly reverse derivative settlement rules after pushback, sources say
SEBI is reportedly planning to roll back the use of closing auctions for calculating derivatives settlement prices following market pushback. The regulator intends to switch to a volume-weighted average price for the final 30 minutes of trading to reduce volatility.
Why it matters
This policy shift reflects the regulator's responsiveness to market participants and aims to stabilize derivative pricing mechanisms in India's financial markets.
India’s markets regulator is likely to stop using closing auctions to calculate derivatives settlement prices for at least a year, two sources with direct knowledge of the matter said, in a partial reversal of new mechanisms it has introduced for setting the closing prices of key stocks and derivative contracts.
The Securities and Exchange Board of India (SEBI) in August introduced a new mechanism called the closing auction session, or CAS, for stocks that have futures and options contracts linked to them.
Under this system, a short auction at the end of the trading day helps determine the closing price of a stock. The new process, similar to that used in global markets including the U.S. and Hong Kong, has led to sharp swings in derivatives prices on expiry days, prompting the regulator to review it.
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