Market regulator Securities and Exchange Board of India's (SEBI) Secondary Market Advisory Committee (SMAC) has favoured retaining the existing volume-weighted average price (VWAP) methodology for determining the settlement price of index and stock derivatives on expiry days, rejecting an immediate shift to a blended formula incorporating closing auction session (CAS) prices, three sources told Moneycontrol.
Under Option 2 of SEBI's September 12 consultation paper, the settlement price will be calculated using the VWAP of trades executed between 3 pm and 3:30 pm during the continuous trading session (CTS). The panel has favoured retaining this arrangement for at least a year before the regulator considers a transition to a new methodology, sources said.
After the Moneycontrol story was published, BSE shares rose 3% on October 15.
At 2:08 pm on October 15, BSE shares were trading 2.8% higher at Rs 3,430 apiece. NSE shares were trading 0.6% higher at Rs 1,773 apiece.
The new approach would align India more closely with US and European markets, where derivatives settlement is often determined using dedicated pricing mechanisms, including volume-weighted average prices over set trading periods, rather than a single closing auction.