Sebi Proposes New CAS Framework, Two Options for Expiry-Day Settlement

The Securities and Exchange Board of India (SEBI) has laid out two alternatives for determining the derivatives settlement price on expiry days. The first proposal, which has been adopted by the regulator, suggests a blended Value Weighted Average Price (VWAP) approach after one year. This approach will be applied to 90% of the transactions, while the current Closing Time Settlement (CTS) VWAP process will continue to be used for 10% of the transactions. The second proposal keeps the current CTS VWAP process in place for the present. The regulator has also proposed a phased implementation of the new framework, with the blended VWAP approach being introduced in stages over the next three years. SEBI has cited the need for a more efficient and transparent derivatives market as the primary driver for the changes. The regulator has also stated that the new framework will help to reduce the volatility in the derivatives market and promote a more stable trading environment. The proposals have been well-received by industry experts, who have praised the regulator's efforts to modernize the derivatives market. The new framework is expected to be implemented by the end of this year, pending regulatory approvals. The implementation of the new framework is expected to have a significant impact on the derivatives market, with experts predicting a reduction in volatility and an increase in market liquidity.