Sebi may review expiry-day settlement price mechanism

NEW DELHI: Sebi chairman Tuhin Kanta Pandey on Tuesday said the capital markets regulator intends to address concerns over the settlement price for derivatives on expiry days and other related issues.To address market participants' concerns, Sebi floated a consultation paper earlier this month seeking public comments on the proposed changes to the methodology for determining expiry-day settlement prices of index and single-stock derivatives. The proposals include delinking derivatives' settlement prices from the cash-market closing price, discontinuing live indicative index values during the CAS (Closing Auction Session) and making orders placed beyond the 1% band more binding."Having successfully established the CAS as an important market structure reform, we intend to address concerns in respect of settlement price for derivatives on expiry days and other related issues. A consultation paper has already been issued inviting public comment," Pandey said at the 11th JP Morgan India Conference.The regulator proposed two options for determining the settlement price. Under the first, called Blended VWAP, the settlement price would be based on transactions executed during the last 30 minutes of the Continuous Trading Session (CTS) and the 10-minute CAS. The contribution of each period would be based on its actual traded value, with no fixed weight assigned to either.Under the second option, Sebi proposed continuing with the existing CTS Volume weighted average price (VWAP) methodology, under which only trades executed during the last 30 minutes of CTS would be considered. The regulator said the CTS VWAP could be retained as an interim methodology to provide continuity and allow market participants more time to familiarise themselves with CAS.Get the latest Business News and Live updates. Download the TOI app.