Sebi set to review derivative settlement prices amid concerns over CAS

Mumbai: The Securities and Exchange Board of India (Sebi) on Thursday said it would review the methodology used to determine settlement prices for derivative contracts on expiry, following feedback from market participants after the rollout of the new closing auction session (CAS) in the equity cash market.

"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 for which a consultation paper will be issued in about a week," Sebi said in a statement.

The regulator introduced the CAS in the equity cash segment from August 3 to determine the closing price of securities. Under the framework, the closing price determined through the auction session also serves as the basis for determining settlement prices for derivative contracts on expiry.


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The regulator's decision to review the methodology comes after its assessment of the first month of CAS operations and feedback received from various stakeholders. "Among the issues raised, 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," Sebi said. CAS is a call auction mechanism for determining the closing price of stocks in the cash segment on which derivative contracts are available.

By aggregating buy and sell interest at the close of the market into a single price discovery process, CAS strengthens the transparency, integrity and fairness of the closing session and brings the Indian market in line with global best practices.