Regulator Seeks Feedback On Changes
SEBI has proposed changes to the methodology for calculating expiry-day settlement prices of index and stock derivatives following concerns over the newly introduced Closing Auction Session (CAS). (The Economic Times)
Key Highlights
- SEBI has proposed two options for expiry-day settlement prices.
- One option combines the final 30-minute CTS VWAP with the 10-minute CAS.
- The second option retains the existing last-30-minute CTS VWAP method.
- CAS was introduced in the equity cash segment from August 3.
- SEBI has also proposed changes to market timings and order rules.
- Stakeholders can submit comments on the proposals until October 3. (Rediff)
News Story
Markets regulator SEBI has proposed changes to the methodology used to calculate expiry-day settlement prices for index and stock derivatives, following feedback on the newly introduced Closing Auction Session.
Under the first proposal, the settlement price would be calculated using a blended Volume Weighted Average Price (VWAP), combining trades executed during the final 30 minutes of the Continuous Trading Session (CTS) with trades during the 10-minute CAS.
The second option would continue using the existing CTS VWAP methodology, based on trades executed during the last 30 minutes of continuous trading. Under this approach, CAS trades would not be included in expiry-day derivative settlement calculations. (Rediff)
SEBI introduced CAS in the equity cash segment from August 3 to improve closing-price discovery. Under the current framework, the CAS-determined closing price also serves as the basis for settling derivative contracts on expiry.
However, market participants raised concerns about using the auction-determined closing price for derivatives settlement, prompting the regulator to review the methodology.
SEBI has also proposed changes to market timings, including reducing the transition period between continuous trading and CAS to around one minute and cutting the post-CAS derivatives trading window from 10 minutes to five minutes. (Business Standard)
The regulator has further proposed stopping the dissemination of indicative index values during CAS while continuing to provide indicative equilibrium prices for individual securities. It has also suggested restrictions on cancelling certain orders placed more than 1% away from the reference price. (Reuters)
SEBI has invited comments from market participants on the proposed changes until October 3. (Rediff)
