SEBI to partially reverse derivatives settlement rules after pushback, sources say
The Securities and Exchange Board of India (SEBI) in August introduced a new mechanism called the closing auction session (CAS) for stocks that are linked to futures and options. | Photo credit: Reuters
India’s markets regulator is likely to stop using closing auctions to calculate settlement prices for derivatives for at least a year, two sources with direct knowledge of the matter said, in a partial reversal of new mechanisms it has put in place to determine the closing prices of key stocks and derivatives contracts.
The Securities and Exchange Board of India (SEBI) in August introduced a new mechanism called the closing auction session (CAS) for stocks that are linked to futures and options.
Under this system, a short auction at the end of the trading day helps determine the closing price of the stock. The new process, similar to that used in global markets including the US and Hong Kong, led to sharp swings in derivatives prices on expiry days, prompting the regulator to review it.
In a post on X over the weekend, SEBI said it had received 20,000 proposals to amend the rules in response to a consultation paper issued last month.
Instead, the volume-weighted average price of the last 30 minutes of trading will be used to price the derivative, the sources said.
For underlying stocks in the less liquid cash market, a closing auction will still be used to determine the price at the end of the day, said the sources, who declined to be identified because they are not authorized to speak to the media.
SEBI is expected to make changes by the end of this month.
A SEBI spokesperson did not respond to a request for comment.
The new approach would bring India more in line with US and European markets, where settlement of derivatives is often determined through special pricing mechanisms, including volume-weighted average prices over set trading periods, rather than a single final auction.
Full implementation plan
The regulator also proposed in its revision plans in September to stop publishing the index’s indicative value and only publish indicative prices for individual stocks during the 10-minute CAS window, arguing that the value of the index is still being determined.
Most of the comments it received said sophisticated trading departments could reconstruct those values independently and that removing them would reduce transparency without addressing manipulation concerns, the sources said.
“The regulator agrees but will push for investors to be more aware that the price of the underlying index is only determined at the end of the 10-minute window,” said the second source.
Feedback also favored keeping the current schedule largely intact, with regular trading until 3:30 p.m. and derivatives trading until 3:45 p.m., as this would aid price discovery and better align derivatives trading with the cash market closing process.
Published – 5 Oct 2026 23:20 IST