SEBI Considers Returning to VWAP Settlement on Derivative Expiry Days
· Business · LiveMint, Business Standard
The stock market regulator may bring back the old volume-weighted average price mechanism to settle derivative contracts on expiry days in a partial revision to the closing auction session introduced a month ago. The Securities and Exchange Board of India stated it will review the settlement process after receiving market feedback and may issue a consultation paper within a week. While daily CAS will continue, SEBI may propose settling weekly and monthly derivatives using the previous VWAP model or a combination of VWAP and CAS prices to smooth out last-minute market swings. Before CAS debuted on August 3, derivatives were settled using VWAP during the last 30 minutes of trading across 213 eligible stocks. Since the introduction of CAS, settlement occurred through thinly traded auctions between the National Stock Exchange and BSE, causing wild price swings in index options.
Why it matters
Traders and institutional investors face potential changes to derivative settlement rules that aim to curb last-minute market volatility on expiry days.
Read the original report — LiveMint
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