India's SEBI partly reverses derivative settlement rules after pushback
SEBI will settle expiring stock and index derivatives on 30-minute VWAP instead of closing auction prices, with the changes effective December 7.
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what happened
India's markets regulator, the Securities and Exchange Board of India (SEBI), said on Thursday that expiring stock and index derivatives will be settled using volume-weighted average prices from the final 30 minutes of regular trading. This reverses an earlier plan to base those settlements on closing auction prices.
The closing auction session, launched on August 3, will still set closing prices for applicable cash-equity securities. Apart from provisions on transitioning iceberg orders, the changes take effect on December 7. Stock derivatives will keep trading until 3:45 p.m. on all trading days, including expiry days.
why it matters
For the market, this means a return to averaging prices across the last half hour, which should soften sharp swings near the close. Reuters reported that erratic moves in expiring contracts had pushed traders to pull back from volumes, so the reversal targets that concern. Market participants should note the new order-entry schedule and effective date when planning around expiries.
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