Market regulator Securities and Exchange Board of India (SEBI) is set to review the methodology for determining settlement prices for derivative contracts at expiry, following feedback from market participants regarding the use of the closing auction session (CAS)-determined closing price.
In
a release, the market regulator said that it may propose changes to the existing framework and is likely to issue a consultation paper on the matter within about a week.
The move comes nearly a month after CAS was introduced in the equity cash segment on 3 August 2026. The mechanism was brought in to determine the closing price of securities, with the CAS closing price also serving as the basis for settlement prices of derivative contracts on expiry.
"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," SEBI said.
SEBI said it has closely monitored CAS's functioning since its introduction and assessed its impact on the market during its first month of operation. The regulator has also been in regular discussions with stock exchanges, brokers, proprietary traders, software vendors, mutual funds, industry associations and foreign portfolio investors (FPIs) to identify and address operational concerns arising from the new system.
The review follows feedback received from a range of market participants through multiple channels, including social media and other media platforms. While the CAS framework had undergone extensive consultation before its implementation, the regulator said it has taken into account the experience gained during the initial phase of its operation.
CAS was introduced after two rounds of public consultation, held on 5 December 2024 and 22 August 2025. SEBI said the framework was finalised after considering the responses received during these consultations, along with discussions involving its advisory committees, stock exchanges, broker associations, institutional investors and other market participants.
The key issue now under review is the linkage between the cash market's CAS closing price and the settlement price of derivatives on expiry. SEBI's proposed changes will be outlined in the consultation paper expected next week, after which stakeholders will have an opportunity to submit their views.
The regulator's decision to revisit the methodology highlights the importance of monitoring the practical impact of a market-wide change after implementation, particularly where the closing price of the cash market has a direct bearing on derivative settlements.
SEBI did not specify what changes it is considering or indicate whether it intends to alter the role of the CAS closing price altogether. Details of the proposed methodology are expected to emerge once the consultation paper is released.
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