Mumbai, September 12 (Daily Kiran) : The Securities and Exchange Board of India (SEBI) is poised to publish a consultation paper regarding the Closing Auction Session (CAS) this Saturday. This document may propose changes to the current process for determining settlement prices of derivative contracts.
According to a report from NDTV Profit, discussions on this proposal are likely to take place during the SEBI board meeting scheduled for September 24. The meeting will address concerns raised by market participants regarding the calculation of settlement prices for derivatives on expiry days under the new CAS mechanism.
SEBI does not plan to withdraw the CAS but aims to enhance the process for calculating settlement prices during auction sessions on expiry days. Chairman Tuhin Kanta Pandey has previously stated that the “CAS framework will remain in the market,” and the regulatory body is working to resolve the issues highlighted by market participants.
Under the CAS, which came into effect on August 3, trading for eligible shares in futures and options (F&O) ceases at 3:15 PM. These securities are then sent to a 20-minute auction where buy and sell orders are matched to establish an official closing price. Trading for non-F&O shares continues until 3:30 PM, while stock and index derivatives can be traded until 3:40 PM.
The new CAS has led to significant volatility in the Indian stock market, particularly on expiry days for derivatives. During a recent session, the Sensex’s indicative close briefly dropped by 2.5%, causing a surge in the premiums of its put options by 400-500%. Similarly, on Tuesday, trading on expiry day saw dramatic increases in Nifty’s put options.
Analysts suggest that the CAS has made trading on expiry days less predictable for systematic options strategies. They note that limited participation in the auction means that only a few orders can significantly impact the closing price.
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