SEBI's Updated Closing Auction Rules For Derivatives Expiry May Boost F&O Trading Volumes
India's equity derivatives market could witness a recovery in trading activity after the Securities and Exchange Board of India (SEBI) reversed a controversial settlement mechanism that had created uncertainty among market participants. The regulator announced on Thursday that derivatives expiring on a particular trading day would be settled using the volume-weighted average price (VWAP) of…
The Securities and Exchange Board of India (SEBI) has reversed a controversial settlement mechanism for equity derivatives expiring on specific trading days. This change could potentially boost trading volumes in the futures and options (F&O) market. Starting from a particular day, derivatives will now be settled using the volume-weighted average price (VWAP) of the underlying stocks during the final 30 minutes of continuous trading.
This move aims to reduce volatility and provide greater clarity in determining settlement prices. Market participants believe the adjustment will restore confidence in the sector. Experts anticipate a gradual recovery in derivatives trading volumes as the pricing mechanism becomes less susceptible to sudden fluctuations. While the revised rules benefit brokers, traders, and proprietary trading firms, SEBI's broader restrictions remain in effect to control excessive speculation in derivatives trading.
The ultimate success of the new settlement process hinges on market participation and prevailing regulatory conditions.
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