SEBI Proposes Changes to Derivatives Settlement on Expiry Days

India's market regulator has proposed changes to how derivatives contracts are settled on expiry days, seeking to address volatility concerns linked to the recently introduced Closing Auction Session. The Securities and Exchange Board of India released a consultation paper on September 12 outlining potential adjustments to the settlement price methodology, market timings, and order handling rules. SEBI confirmed it will not roll back the CAS mechanism itself, which was launched on August 3. Instead, the regulator is reviewing the calculation of settlement prices for index and stock derivatives on expiry days, citing heightened activity in expiring index options and derivatives trading based on the Indicative Equilibrium Price during the auction. The consultation paper proposes two alternatives for determining expiry-day settlement prices. The first would use a blended volume-weighted average price combining the final 30 minutes of continuous trading with the 10-minute CAS window.