India’s markets regulator will restore a 30-minute VWAP settlement method and separate the closing auction session in a bid to reduce volatility and revive participation in expiry-day derivatives trading.
India’s markets regulator has moved to soften a contentious overhaul of the closing auction system, in a shift that analysts say could help bring traders back to expiry-day derivatives trading. According to Business Standard, the Securities and Exchange Board of India has altered the settlement formula for index derivatives on expiry days and adjusted the timing of the Closing Auction Session, or CAS, in changes due to take effect on December 7, 2026.
Under the revised framework, settlement for index derivatives on expiry days will again be based on the volume-weighted average price of constituent securities during the last 30 minutes of continuous trading in the cash market. For stock derivatives, the settlement price will be tied to the VWAP of the underlying share over the same 30-minute window across all exchanges. The CAS itself will run as a separate 10-minute session from 3.30 pm to 3.40 pm, while expiring index contracts will stop trading at 3.30 pm and stock derivatives will continue until 3.45 pm.
Jefferies said the changes should curb the volatility that had discouraged participation under the earlier setup, although it warned that the impact on brokers’ earnings may be limited if exchange turnover has already recovered to previous levels. The note said trading activity per day has been improving from August 2026 lows after the CAS was introduced on August 3. Business Standard also reported that industry participants believe the regulator has adopted most of the recommendations submitted during consultation.
Market participants have argued that the earlier structure left too wide a gap between reference prices and expiry-day settlement levels, making hedging more difficult for option writers and other traders. Amit Chandra of HDFC Securities told Business Standard that traditional expiry strategies were disrupted because prices could swing sharply around the session, reducing participation from high-frequency traders and larger players. The latest revision is therefore being viewed as an attempt to restore a more predictable market structure while keeping the closing auction in place.
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