CAS tweaked, change in F&O settlement rules

MUMBAI: Markets regulator Sebi on Thursday revised the process for Closing Auction Session (CAS) that included changing the trading timings and how the settlement prices of stocks and indices would be arrived at for derivatives contracts, a Sebi circular said.Under the changed rules, there will be a 10-minute CAS that will start at 3:30 pm and end at 3:40 pm on all trading days. At the same time, trading in index and stock derivatives will continue until 3:45 pm, except for index derivatives contracts on the expiry day.Sebi also brought in a major change relating to how the settlement prices of expiring derivatives contracts are calculated. This will now be based on a Volume Weighted Average Price (VWAP) methodology using the last 30 minutes of continuous trading.Order entry for both limit and market orders will be allowed from 3:31 pm to 3:36 pm, followed by a period during which only limit orders can be placed. The session will close randomly between 3:38 pm and 3:40 pm.The post-close session in the cash segment will run from 3:50 pm to 4 pm, with trades executed at the closing prices of securities.Earlier, since the introduction of CAS in Aug, this was based on prices arrived through the CAS process. After CAS was enforced, during several sessions, wild swings in index levels and stock prices were seen.After this, and also after Sebi’s investigations found some brokers were manipulating the system, the regulator issued another consultation paper.Post that, Sebi also had discussions with its Secondary Market Advisory Committee and with the stock exchanges. It also went through the several thousand comments it received on its proposals. Sebi introduced CAS in India with the objective of improving transparency and price discovery while ensuring a more orderly closing process.The new changes would be implemented in two phases, between Dec 7 and Feb 8, 2027, the Sebi release saidYou use AI every day. Now get your AI Quotient. Take the AIQ test.