Business · Markets · 2 hrs ago
Sebi Likely to Blend Trading and Auction Prices for Derivatives Settlements
India’s markets regulator, Sebi is likely to change how derivatives settlement prices are calculated to reduce sharp swings on options expiry days.
The proposed method would combine the volume-weighted average price of trades in the final 30 minutes of regular trading with prices from a 10-minute closing auction.
The auction-only system began on 3 August, but thin auction trading has raised concerns about price distortions.
Some market participants have asked Sebi to keep the earlier pricing method on expiry days and introduce the blended approach gradually.
Sebi reviewed possible changes in a consultation paper in September, and its chairman said on 10 October that final guidelines would come in about a week.
The regulator’s final guidelines will determine how the pricing change is applied.
Sebi is likely to adopt blended pricing for derivatives settlement to reduce sharp price swings on options expiry days.
The proposed method would combine the volume-weighted average price of trades in the final 30 minutes of continuous trading with prices from the 10-minute closing auction session.
Sebi outlined two possible approaches in a consultation paper in September after market participants raised concerns about thin auction liquidity.
Many participants have urged the regulator to retain VWAP-based pricing on expiry days and introduce blended pricing gradually.
Sebi chairman Tuhin Kanta Pandey said on 10 October that final guidelines on the closing auction session would be issued in about a week.
- Who
- The Securities and Exchange Board of India (Sebi), India’s market regulator.
- What
- Sebi is likely to adopt a blended pricing framework for derivatives settlement prices.
- When
- The report was published on 15 October 2026. Sebi reviewed the framework in September.
- Where
- India.
- Why
- To curb price swings and distortions on weekly and monthly options expiry days.
Market participants seeking a transition period
Proponents of adopting blended pricing without a transition period
Settlement approach
Market participants seeking a transition period
Many market participants want VWAP-based settlement pricing retained on expiry days, with blended pricing introduced on non-expiry days for a year.
Proponents of adopting blended pricing without a transition period
A blended pricing mechanism without a one-year transition period could rectify price distortions on expiry days.
The new closing auction system was introduced.
Sebi reviewed the framework through a consultation paper after market participants raised concerns about a liquidity squeeze during the auction.
Sebi chairman Tuhin Kanta Pandey said final guidelines on the closing auction session would be issued in about a week.
Mint reported that Sebi was likely to adopt blended pricing for derivatives settlements.
- Proposed blend
- VWAP from the final 30 minutes of continuous trading plus prices discovered in the 10-minute closing auction session
- Consultation paper
- Issued in September
- New system introduced
- 3 August
- NSE closing auction volumes
- Around ₹1,000–1,200 crore
- Auction volume comparison
- Roughly one-fifth of volume during the final 15 minutes of the earlier continuous trading session
1 source
What people are saying
The market regulator is likely to consider a blended VWAP from the get-go. The idea is to delink the pricing from being derived solely by CAS. If you delink it using VWAP, that should solve the problem,
Market participants believe that CAS would become more liquid after a one-year time frame,