SEBI Restores 30-Minute VWAP for Expiry-Day Settlements
India’s market regulator will separate derivatives settlement from closing auctions, a change analysts say may ease volatility and support trading volumes.
Key takeaways
- From December 7, expiry-day derivatives will use the final 30 minutes’ VWAP for settlement.
- CAS will continue to set official closing prices for stocks covered by the auction.
- Analysts expect trading volumes to recover, but the scale of any rebound is uncertain.
India’s market regulator will restore the 30-minute volume-weighted average price (VWAP) method for settling derivatives on expiry days from December 7. The change separates settlement prices from the closing auction session, or CAS.
For expiring index derivatives, settlement will use an index value calculated from the VWAPs of its constituent stocks during the final 30 minutes of regular trading. Stock derivatives will use the underlying stock’s VWAP. CAS will still determine official closing prices for the stocks covered by the auction.
The changes follow trader complaints about sharp swings after CAS began on August 3. Under the revised hours, stock trading covered by CAS will run until 3:30 p.m., followed by the auction until 3:40 p.m. Index derivatives will trade until 3:45 p.m., except on expiry days, when they will close at 3:30 p.m.
NSE derivatives turnover fell 19.2% month on month to ₹34.48 trillion in August after CAS was introduced, Reuters reported. The decline also reflected tighter rules on lending to proprietary traders and higher transaction taxes.
Analysts said the VWAP change may reduce expiry-day volatility and help bring back traders who had cut activity. They expect volumes to return toward pre-CAS levels, but said the extent of any recovery is uncertain.
This article was produced with the help of AI technology. Based on reporting by the outlets listed above.
