India’s markets regulator, SEBI, is set to overhaul the methodology for setting expiry-day settlement prices following sharp swings caused by the introduction of a new closing auction system, amid concerns over heightened volatility and declining shares.
India’s markets regulator is moving quickly to reassess how expiry-day settlement prices are set after a newly introduced closing auction session triggered sharp swings in stocks and derivatives. In a statement on Thursday, the Securities and Exchange Board of India said it may propose changes to the method used to determine settlement prices for derivative contracts and plans to issue a consultation paper within about a week. The review follows feedback from market participants after the closing auction session began on 3 August, with the system now used to establish end-of-day prices for more than 200 equities. Those closing prices also feed into futures and options settlement, which has intensified concern about abrupt moves late in the trading day. (sebi.gov.in)
The rethink comes against a weak backdrop for Indian shares. Bloomberg reported that the NSE Nifty 50 fell for a fourth straight session on Thursday and was on track for a fourth consecutive weekly decline, even as Asian equities and currencies firmed early on Friday after investors scaled back expectations for a Federal Reserve rate increase this month. The broader complaint from traders is that the new auction has added volatility at the close rather than removing it, especially on derivatives expiry days when price discovery in the cash market can have an outsized effect on options and futures. (sebi.gov.in)
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