SEBI To Issue Consultation Paper On Closing Auction Session, May Tweak Derivatives Settlement Price Rules
Summarized by AI; it may make mistakes. Check important info
Summarized by AI; it may make mistakes. Check important info
The Securities and Exchange Board of India (SEBI) is set to issue a consultation paper on the Closing Auction Session (CAS) on Saturday, with the market regulator likely to propose changes to the way settlement prices for derivative contracts are calculated.
The proposal is expected to focus particularly on expiry-day settlement prices, an issue that has raised concerns among market participants since the new CAS mechanism came into effect.
SEBI Unlikely To Roll Back Closing Auction Session
SEBI is not considering a rollback of the Closing Auction Session itself. Instead, the regulator is expected to look at targeted changes to how the auction mechanism interacts with the derivatives market.
The proposal could be discussed at the upcoming SEBI Board meeting on September 24.
SEBI Chairman Tuhin Kanta Pandey had earlier said that the regulator was examining concerns raised by market participants and would work on solutions.
“CAS is here to stay,” Pandey had said, indicating that the broader closing auction framework would remain in place.
What Is The Closing Auction Session?
The Closing Auction Session came into effect on August 3 as part of changes to the way closing prices are determined for stocks eligible for futures and options trading.
Under the new system, continuous trading in F&O-eligible stocks ends at 3:15 pm. These stocks then enter the closing auction, where buy and sell orders are matched.
The price determined through this process becomes the stock’s official closing price.
Non-F&O stocks continue to trade normally until 3:30 pm, while stock and index derivatives continue trading until 3:40 pm.
Why Is SEBI Considering Changes?
The CAS mechanism was introduced to bring buyers and sellers together during the closing process and improve price discovery.
However, its impact on the calculation of derivative settlement prices on expiry days has raised concerns among traders and other market participants.
Read: Sensex Calls Surge 40-Fold in Minutes as Expiry-Day Closing Auction Triggers Wild Swing
SEBI’s proposed changes are therefore expected to focus on the settlement-price methodology rather than scrapping the closing auction itself.
The consultation paper will give market participants an opportunity to provide feedback before SEBI considers the proposed changes at the Board level.
