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SEBI may pause using closing auctions for derivatives settlement

The regulator plans to stop using the closing auction to set derivatives settlement prices for at least a year, after sharp price swings near expiry days.

Reported · Written up by our desk · Trade & Tariffs

India's markets regulator, SEBI, is expected to partly reverse plans for a new closing-auction mechanism used to set closing prices for key stocks and their linked futures and options, according to two sources familiar with the matter, cited by Reuters.

SEBI introduced the closing auction session, or CAS, last month, using a short auction at the end of the trading day to determine stock closing prices. Reuters reports the similar approach, used in markets including the US and Hong Kong, contributed to sharp swings in derivatives prices on expiry days, prompting SEBI to review the rules.

Reuters says SEBI received 20,000 suggestions on its consultation in response to the auction changes, after posting on X over the weekend. A key change expected is a move to stop using the closing auction to calculate derivatives settlement prices for at least a year.

Instead, Reuters reports SEBI is likely to use the volume-weighted average price of the last 30 minutes of trading to determine derivatives settlement prices.

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