The Daily PulseBusiness
Sebi to Ease Derivative Settlement Rules After Market Swings
Reported by Rituparna Sen (Section Editor) · Economic Times - Markets ·
Confirmed by a second source: Livemint - Markets
Representative image · Wikimedia CommonsRule Changes
India's markets regulator is set to partly reverse plans for key stock and derivative pricing after sharp price swings on expiry days. The Securities and Exchange Board of India may stop using the closing auction for derivatives settlement for at least a year. According to Livemint, the regulator received 20,000 suggestions to tweak the rules after issuing a consultation paper last month. Sebi is expected to implement the changes by the end of this month.
New Pricing Method
Instead of the closing auction, the market will shift to a 30-minute volume-weighted average price to determine derivative pricing. For underlying stocks in the less liquid cash market, the closing auction will still be used to find the end-of-day price. Similar closing auction systems are used in global markets including the US and Hong Kong, but the recent changes led to sudden price jumps on expiry days.
Context
Financial regulators often test new trading rules to match global standards, but quickly adjust them if market stability is threatened by heavy volatility. Share markets rely heavily on smooth pricing methods at the end of each trading day to settle futures and options contracts without sudden losses for traders.
ExplainerWhy this matters
What Happened
Sebi introduced a closing auction session for stocks with futures and options links, but the new system triggered sharp price swings on expiry days, forcing a quick partial rollback.
Why It Matters
Derivative settlement prices decide massive financial payouts for traders and institutional investors. When settlement methods cause sudden, artificial price spikes at the close of trading, market participants face unexpected losses, which hurts overall market trust.
What Happens Next
Sebi is expected to implement the revised rules by the end of the month, shifting back to a 30-minute average price for derivatives while keeping auctions only for less liquid stocks.
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Representative image · Wikimedia CommonsBusinessExplainerUnconfirmed — Reported by one source so farImportant
SEBI set to pause new derivatives settlement rules after market pushback
Reported by Neha Sharma (Staff Writer) · The Hindu - Business ·
