SEBI to partially reverse derivative settlement rules in India

The Securities and Exchange Board of India is likely to stop using closing auctions to calculate derivatives settlement prices for at least one year. Instead, the regulator will use the volume-weighted average price from the last 30 minutes of trading to determine derivative pricing. The closing auction will remain in use for setting the end-of-day price of underlying stocks in the less liquid cash market.

This change represents a partial reversal of new mechanisms introduced for setting closing prices of key stocks and derivative contracts. The decision follows the regulator receiving 20,000 comments on a consultation paper regarding market timings and derivative settlement methodology.