Market regulator Securities and Exchange Board of India (SEBI) is set to review the methodology for determining settlement prices of derivative contracts, with the regulator likely to issue a consultation paper on the matter on Saturday, September 12, according to media reports.
The review comes after sharp swings in the headline indices on expiry days following the rollout of the Closing Auction Session (CAS) in August. SEBI is expected to propose changes to the existing methodology to address concerns over how settlement prices are determined under the new system.
SEBI had earlier said it was closely monitoring the functioning of CAS during its first month and had held discussions with a wide range of market participants, including stock exchanges, brokers, proprietary traders, software vendors, mutual funds, industry associations, and foreign portfolio investors.
The regulator also received feedback through social media and other media platforms. On Thursday, the regulator clarified that it had no intention of rolling back the new system.
SEBI Chairman Tuhin Kanta Pandey on Thursday said the regulator would retain CAS. Speaking on the sidelines of the Global Fintech Fest in Mumbai, Pandey said, "MSCI acknowledged that the (recent) rebalancing went well under CAS. CAS is here to stay. The methodology for determining the closing price under CAS for derivatives on expiry day is being reworked."