When SEBI released its consultation paper on September 12, it presented two alternative settlement frameworks for derivatives. One option proposed a blended VWAP incorporating trades during the final 30 minutes of continuous trading and the subsequent 10‑minute closing auction, while the other kept the continuous‑trading‑session‑only VWAP as an interim arrangement for at least a year.
Under the retained method, the settlement price is calculated using the VWAP of trades executed between 3 pm and 3:30 pm during the continuous trading session. This window has been shown to capture the highest liquidity and mitigate the volatility that can arise from the closing auction.
The closing auction, introduced on August 3 for stocks in the futures and options segment, has sparked concerns about price movements that could distort derivative settlement. By excluding the auction period from the VWAP calculation, the committee aims to shield settlement prices from sudden spikes or dips that are often observed in the final ten minutes.
The committee also backs a proposed market schedule: regular trading in stocks covered by CAS will continue until 3:30 pm, followed by a closing auction from 3:31 pm to 3:40 pm, and derivatives trading will be permitted until 3:45 pm. It supports displaying the indicative equilibrium price during CAS, while the treatment of market orders remains under review. Traders should monitor these changes, as they could influence order placement strategies and risk management practices ahead of the next quarter's earnings season.