Sebi to review derivatives settlement prices amid CAS volatility concerns

The Securities and Exchange Board of India (Sebi) is set to review the methodology used to determine settlement prices for derivative contracts following concerns raised by market participants over volatility after the rollout of the Closing Auction Session (CAS) in the equity cash segment.

The capital market regulator is expected to issue a consultation paper on the proposed changes in about a week, following a review of feedback received during the first month of CAS operations, Sebi said in a statement today.

“Among the issues raised, a significant area of feedback relates to the determination of settlement prices of derivative contracts on expiry based on the closing price determined through CAS,” the regulator said.

"Having considered the experience of the initial period of CAS implementation and the feedback received from various stakeholders, Sebi may be proposing certain changes in the methodology for determination of settlement prices of derivative contracts for which a consultation paper will be issued in about a week," it added.

In the first month of CAS implementation, the National Stock Exchange (NSE) recorded cumulative turnover of around ₹63,000 crore through the mechanism, indicating strong participation from market participants.

CAS activity peaked on August 31, when turnover touched ₹39,718 crore, or around $4.2 billion, as the market witnessed its first index rebalancing since the mechanism went live, NSE said in a release early this week.

Review follows first month of CAS

Sebi introduced CAS on August 3 as part of efforts to prevent market manipulation and increase transparency. CAS is a call-auction mechanism used to determine the closing price of stocks in the cash segment on which derivative contracts are available.

Under the framework, buy and sell orders are pooled without immediate execution during a designated window toward the end of trading, with orders matched through an auction-style process.

The review comes after the regulator monitored the functioning of CAS and its impact on the market during the initial month of implementation. Sebi said it has also been engaging with a wide range of stakeholders, including stock exchanges, brokers, proprietary traders, software vendors, mutual funds, industry associations and foreign portfolio investors, to address operational and other issues arising from the new framework.

“Having considered the experience of the initial period of CAS implementation and the feedback received from various stakeholders, Sebi may be proposing certain changes in the methodology for determination of settlement prices of derivative contracts,” the regulator said.

The CAS framework was introduced after extensive stakeholder consultations and policy deliberations. Sebi had conducted two rounds of public consultation, in December 2024 and August 2025, and subsequently discussed the framework with its advisory committees, stock exchanges, broker associations, institutional investors, market participants and other stakeholders.

The regulator said the feedback received during these consultations was examined and considered while finalising the framework.

Since its implementation, Sebi has continued to engage with market participants to facilitate a smooth transition to CAS. The regulator has also received feedback through multiple channels, including social media and other media platforms.

The proposed consultation paper is likely to provide details of the changes Sebi is considering to the methodology for settling derivative contracts on expiry, particularly in cases where the settlement price is linked to the closing price determined through CAS.

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)