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The Securities and Exchange Board of India (SEBI) is set to review the methodology for determining settlement prices of derivative contracts on expiry, a month after rolling out the Closing Auction Session (CAS) in the cash market.
In a press release issued on Thursday, SEBI said it may propose changes to the settlement price framework and will issue a consultation paper in about a week. SEBI had introduced CAS in the equity cash segment vide circular dated January 16, 2026, with effect from August 3, 2026, for determination of the closing price of securities. As stipulated in that circular, the closing price determined through CAS also serves as the basis for determination of settlement prices for derivative contracts on expiry. The CAS framework was introduced after extensive stakeholder consultations, including two rounds of public consultation on December 5, 2024 and August 22, 2025, and discussions in its advisory committee with stock exchanges, broker associations, institutional investors and other market participants. Since its implementation, SEBI said it has closely engaged with various stakeholders including stock exchanges, brokers, proprietary traders, software vendors, mutual funds, industry associations and FPIs to facilitate smooth implementation and address operational issues during the initial adoption period. The regulator has also been monitoring the functioning of CAS and its impact on the market during its first month of operation. During this period, it received feedback and suggestions through multiple channels, including social media and other media platforms. Among the issues raised, SEBI noted, a significant area of feedback relates to the determination of settlement prices of derivative contracts on expiry based on the closing price determined through CAS. Traders and brokers have flagged concerns since the August rollout that CAS-determined closing prices, formed in a short auction window at the end of the day, can be more volatile and susceptible to last-minute order imbalances, directly impacting F&O expiry payouts. Having considered the experience of the initial period of CAS implementation and the feedback received from various stakeholders, SEBI may be proposing certain changes in the methodology for determination of settlement prices of derivative contracts, the release stated. The proposed review does not signal a rollback of CAS itself, which was brought in to align Indian markets with global practices and improve closing price discovery. Any change will be finalised only after the upcoming consultation paper. (ANI)
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