India’s markets regulator has reversed its expiry-day settlement change after receiving more than 20,000 consultation responses, winning broker support while renewing questions over regulatory intervention.
SEBI’s decision to restore the earlier 30-minute volume-weighted average price settlement method for expiry days has been broadly welcomed by brokers and traders, but the move has also reopened debate over how quickly India’s markets regulator changes course. The revision means derivatives settlement prices will once again be based on the average price of the underlying stock in the final half-hour of normal trading, while the closing auction session will continue to set official end-of-day prices for cash market stocks.
The change follows months of criticism of the closing auction session, or CAS, which SEBI introduced for stocks with derivatives contracts in August. Market participants said the new system was meant to improve price discovery and make index-tracking products such as exchange-traded funds more efficient, but they also argued that thin participation and scope for aggressive order placement created distortions. Business Standard reported that SEBI received more than 20,000 responses to its consultation paper, reflecting unusually strong resistance from traders and brokers to the auction-linked settlement model.
Some market veterans say the regulator should have allowed the framework more time to bed in before intervening again. A Mumbai-based broker told The Hindu BusinessLine that the timing of the rollback was awkward, particularly with what is expected to be India’s largest initial public offering approaching. Other traders said the earlier VWAP-based system had been more familiar and, in their view, less vulnerable to abrupt price swings around expiry. Arun Kejriwal, a market veteran, said some participants had been able to exploit the system and damage market integrity, although he argued the design might have worked better with stronger safeguards against manipulation.
Not everyone sees the review as a setback. The Association of NSE Members of India welcomed SEBI’s revised approach, saying the return to the last 30 minutes’ VWAP for expiry settlement would reduce the scope for price influence while preserving transparency and liquidity. Kamlesh Shroff, the group’s president, said the regulator deserved credit for studying market data, consulting participants and making a course correction. SEBI Whole-Time Member KVR Murthy has indicated the regulator will now “wait and watch” for a year before deciding whether further changes are needed, suggesting the current arrangement is likely to remain under close scrutiny.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
