SEBI’s CAS fix finds early favour for the old way of settling derivatives
SEBI weighs blended VWAP against a one-year return to the old method as traders seem to favour simpler expiry settlement
The Securities and Exchange Board of India's (SEBI) recent proposal to alter the new closing auction session (CAS) for derivatives settlement has met with mixed reactions from market participants. While the regulator aims to make price discovery less disruptive and address practical issues, many still favor the traditional volume-weighted average price (VWAP) method.
SEBI has proposed two settlement options: a blended VWAP using the last 30 minutes of continuous trading and the CAS, or reverting to the pre-CAS method of relying on the final 30 minutes of trading for a year before transitioning to the blended approach. Feroze Azeez, Joint CEO at Anand Rathi Wealth, believes the removal of indicative index values can help minimize auction volatility.
However, Uttam Bagri, promoter director at BCB Brokerage, suggests retaining the VWAP and extending cash market trading to 3:30 pm, followed by the CAS and a five-minute derivatives window. Trivesh Dinesh, COO at Tradejini, emphasizes the need for a transparent, easy-to-understand, and consistent settlement methodology. Trader forums have largely supported retaining VWAP due to its simplicity and established use in expiry settlements. SEBI's varied options highlight the importance of improving CAS volumes.
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