Overview
- SEBI is reported Monday to be preparing a partial rollback that would stop using the Closing Auction Session to calculate derivatives settlement prices and instead use the volume-weighted average price for the final 30 minutes of trading, with implementation expected by the end of October.
- Under the likely plan the CAS would be removed for derivatives settlement for at least one year and the 30-minute VWAP would determine final futures and options settlement prices.
- Regulators moved after the CAS concentrated trading into a short end-of-day auction that produced sharp expiry-day swings and gave large moves in the auction outsized effects on leveraged derivatives positions.
- The closing auction would still be used to set end-of-day prices for less-liquid cash-market stocks, and SEBI has not yet issued a formal order so exact operational rules and timings remain to be published.
- SEBI received about 20,000 responses to its consultation and the reported change would align India’s derivatives settlement method more closely with common U.S. and European practice, which may smooth settlements but will be watched for unintended market effects.