SEBI’s updated F&O expiry settlement framework, effective December 7, eliminates the one‑year transition period and pivots to a 30‑minute VWAP window.
Under the new rules, index derivative contracts will stop trading at 3:30 pm, aligning the close of the trading day with the VWAP settlement period. The earlier consultation paper had proposed a 12‑month ramp‑up, but the regulator chose to implement the change immediately to reduce pricing gaps.
Venkatachalam Shunmugam, partner at MCQube, said the notification signals confidence in the revised mechanism. He cautioned that SEBI retains the flexibility to tweak the framework as market infrastructure evolves, while also urging a focus on improving liquidity in the CAS via securities lending and imbalance‑only orders.
BSE, which has thinner expiry‑day liquidity, is likely to reap the biggest gains from the tighter settlement window, whereas NSE’s deeper order book may experience only marginal shifts. However, the cessation of arbitrage at 3:30 pm could dampen CAS volumes on expiry days, potentially redistributing trading activity to non‑expiry sessions.
Market participants are watching for further CAS liquidity reforms, including new order types that could boost institutional participation. SEBI is expected to announce additional adjustments before the next quarterly review, with analysts noting that the current move is a foundational step toward a more robust closing auction.