India’s market regulator SEBI has proposed changes to the way derivatives settlement prices are calculated on expiry days after increased volatility followed the introduction of a new closing auction mechanism.
SEBI Reviews Expiry-Day Pricing
The Securities and Exchange Board of India is considering changes to the settlement-price mechanism for index and stock derivatives. The proposals come after sharp price swings were observed around expiry sessions following the introduction of th e Closing Auction Session on August 3.
One proposal would use a blended settlement price based on trading during the final 30 minutes of normal trading and the 10-minute closing auction. Another option would calculate the settlement price using only the final 30 minutes of regular trading.
More Changes Under Consideration
SEBI is also considering restrictions on order cancellations above 1% of a reference price and reducing the post-closing auction period to five minutes.
The regulator has invited public comments on the proposed changes until October 3.
Why Traders Are Watching
Expiry days can produce significant volatility in index futures and options. Changes to settlement calculations could affect trading strategies, hedging activity and price behaviour around the market close.
For traders, the proposals are particularly important because settlement prices directly influence the final value of derivatives positions.
Market Impact
If implemented, the changes could r educe some of the sharp price movements associated with expiry-day auctions. However, the impact will depend on the final rules and how traders adjust their strategies.
Indian equities, Nifty and Bank Nifty derivatives are likely to remain in focus as market participants assess the proposed framework.
Outlook
SEBI’s consultation marks another step in its effort to improve price discovery and manage expiry-day volatility. Traders will now watch the consultation process and the regulator’s final decision for clues about how India’s derivatives market could change.