Sebi reviewed the framework through a consultation paper in September, following pushback from market participants over a liquidity squeeze during the auction. The paper outlined two alternatives for calculating closing prices on derivatives expiry days: adopt a blended VWAP-based methodology or retain the existing VWAP calculation based on the last 30 minutes of continuous trading on settlement days for at least a year.
Unlike a simple average, VWAP takes into account both the price and volume of trades. For instance, if 100 shares are traded at ₹10 each and 50 shares at ₹12 each, the VWAP is ₹10.67, compared with a simple average price of ₹11.
Sebi chairman Tuhin Kanta Pandey said on 10 October that the regulator would issue final guidelines on CAS in “about a week’s time”. An emailed query to the regulator did not elicit a response.
Many market participants have urged Sebi to retain VWAP-based settlement pricing on expiry days—Tuesday for Nifty options and Thursday for Sensex options—and introduce blended pricing on non-expiry days for a year before transitioning fully to the blended framework.
Market ``participants believe that CAS would become more liquid after a one-year time frame,” said D.K. Aggarwal, chairman and managing director of SMC Capitals Ltd. However, a blended pricing mechanism without a one-year transition period would also “rectify the price distortions” witnessed on expiry days, he added.