SEBI to partly reverse derivative 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, or CAS, for stocks that have futures and options contracts linked to them. | Photo Credit: Reuters

India’s markets regulator is likely to stop using closing auctions ⁠to calculate derivatives settlement prices for at least a year, two sources with direct knowledge of the matter said, in a partial reversal of new mechanisms it has introduced for setting the ‌closing prices of key stocks and derivative contracts.

The Securities and Exchange Board of India (SEBI) in August introduced a new mechanism called the closing auction ‌session, or CAS, for stocks that have futures and options contracts linked to them.

Under ‌this ⁠system, a short auction at the end of the trading day ⁠helps determine the closing price of a stock. The new process, similar to that used in global markets including the U.S. and Hong Kong, has led to sharp swings in derivatives prices on expiry days, ​prompting the regulator to review ‌it.