BSE, NSE Stocks Rise Up To 3% In Early Trade As SEBI May Change Derivatives Pricing Mechanism
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Shares of BSE, NSE and other capital market companies gained after reports indicated SEBI could replace the closing auction with a 30-minute VWAP for derivatives pricing.
Shares of Bombay Stock Exchange (BSE), National Stock Exchange (NSE) and other capital market companies rose up to 3% in early trade today after a report said the Securities and Exchange Board of India (SEBI) is likely to stop using the closing auction session (CAS) to calculate settlement prices for derivatives for at least a year.
Sources cited by Reuters said SEBI may instead use the volume-weighted average price (VWAP) of the final 30 minutes of trading to determine derivatives pricing. The regulator is expected to implement the change by the end of October. For less liquid stocks in the cash market, however, the closing auction would continue to determine the end-of-day price.
The proposed move follows concerns over sharp price swings in derivatives on expiry days after SEBI introduced the closing auction session in August. At 10:30 am, BSE shares were up 2.42% on the NSE. At the same time, NSE shares were up 1.11% on the BSE.
SEBI Reviews Closing Auction Rules
SEBI introduced CAS for stocks that have futures and options contracts linked to them. Under the system, a short auction at the end of the trading day helps determine the closing price of a stock.
The mechanism is similar to systems used in markets such as the US and Hong Kong. However, the sharp movements seen in derivatives prices on expiry days prompted SEBI to review the process. In a post on social media platform X over the weekend, SEBI said it had received 20,000 suggestions on changes to the rules following a consultation paper issued last month.
Trading Timings May Remain Unchanged
SEBI had also proposed changes to the information available during the CAS window as part of its review plans in September. The regulator had proposed stopping the publication of the indicative value of an index during the 10-minute CAS period. It planned to continue publishing indicative prices for individual stocks.
Most feedback received by SEBI supported retaining the index value, sources told Reuters. They said sophisticated trading desks could calculate the value on their own and that removing it could reduce transparency without addressing concerns over possible manipulation.
Market participants also favoured keeping the existing trading schedule broadly unchanged. Regular trading would continue until 3:30 pm, while derivatives trading would run until 3:45 pm. The feedback said this would support price discovery and keep derivatives trading better aligned with the cash market closing process.
The proposed pricing method would also bring India closer to the US and European markets, where derivatives settlement often uses dedicated pricing methods, including VWAPs over set trading periods rather than a single closing auction.
Also Read - SEBI Investor Awareness Campaign Brings Investing Education To Students And Investors Under Project Jagrook
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Vishwa has spent 10+ years across fintech and FMCG doing what most people miss, connecting the dots, catching trends before they trend, and finding the angle nobody else thought to ask about.
At Kotak Neo, she drives content strategy for neoshorts, Kotak News Desk, and Investing Guide, turning market noise into something worth reading.
When she's not decoding markets, she trades charts for canvases, chasing art, painting, and architecture across cities she's yet to explore.
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