SEBI to Issue New Rules for Derivatives Expiry Pricing Within a Week
The Securities and Exchange Board of India (Sebi) plans to release new guidelines for setting the settlement price of derivative contracts on their expiry day within about a week, according to Chairman Tuhin Kanta Pandey. This follows a review of the market's Closing Auction Session (CAS). The move is part of a wider push to deepen cash markets and improve how prices are discovered. Pandey also mentioned plans for a graded compliance framework for stock brokers based on their size and risk, stating that "one size need not fit all".
What this means
This may sound technical, but it gets to the heart of fairness and stability in the F&O market. The settlement price on expiry day determines who makes and loses money on billions of rupees worth of contracts. Any perception of manipulation or inefficiency in that final price can shake market confidence. By reviewing the closing auction process, Sebi is trying to make it more robust and less susceptible to distortion by a few large trades. For banks with brokerage arms or large treasury desks trading derivatives, this will mean adjusting to a new settlement mechanism. The goal is a more accurate and reliable closing price, reducing the risk of unexpected losses or gains on expiry day.
Most affected: Banks' Brokerage and Treasury Arms
Key takeaway: Prepare for potential changes in the derivatives settlement process that could affect expiry-day trading strategies and risk models.
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