After receiving 20,000 suggestions in its consultation paper, SEBI decided to reverse its last month’s move to a closing auction system for derivative settlement.
Under the existing CAS, a short auction at market close fixes the closing price for stocks with active derivatives. The new approach will instead use the VWAP of the last 30 minutes of trades to calculate the settlement value.
The shift aligns India with global practices where VWAP or dedicated pricing mechanisms are standard for derivative settlement, reducing the sharp price swings seen on expiry days in the current system.
SEBI expects to roll out the change by the end of this month. The move is aimed at stabilizing derivative pricing and improving market confidence, especially for less liquid cash stocks that will still use CAS for end‑of‑day pricing.
Analysts note that the change could lower volatility at expiry, potentially affecting hedging strategies and liquidity provision. Investors will watch how the new pricing mechanism influences the cost of carry and the behavior of large‑cap futures.