BSE shares surge 10% in just 3 sessions. What’s driving the rally?
BSE shares extended their winning streak as Sebi announced a review of the methodology used to determine derivative settlement prices following concerns over the new Closing Auction Session. Trading volumes and option activity have declined sharply, particularly at BSE. A consultation paper expected next week could propose changes aimed at reducing expiry-day volatility and improving risk…
BSE shares surged 10% over three sessions, driven by the Securities and Exchange Board of India (Sebi) implementing a new Closing Auction Session (CAS). Sebi released a circular last week regarding the CAS, which prompted a renewed buying spree. The circular aims to review the current methodology for determining settlement prices for derivative contracts on expiry, based on feedback from the market after the rollout of the new CAS in the equity cash market.
Sebi stated that it may propose changes in the methodology for setting settlement prices, with a consultation paper expected to be released in about a week. This development is significant as the introduction of the Closing Auction Session resulted in lower trading volumes, with derivatives turnover falling to multi-month lows. The uncertainty surrounding expiry day has caused option writers to avoid the market, reducing profitability for proprietary traders.
Sebi's potential changes could address these challenges and improve risk management for expiry-day trading.
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