After a month of concerns raised by brokerages over the new settlement system on stock exchanges, the Securities and Exchange Board of India (SEBI) has agreed to review the methodology for determining settlement prices of derivative contracts following the rollout of the Closing Auction Session (CAS) in the equity cash segment.
The market regulator said on Thursday that it may propose changes to the methodology for determining settlement prices of derivative contracts on expiry, based on the experience of the initial period of CAS implementation and feedback received from market participants. A consultation paper on the proposed changes is expected to be issued in about a week.
SEBI introduced CAS in the equity cash segment from August 3, 2026, for determining the closing price of securities. Under the framework, the closing price determined through CAS also serves as the basis for determining settlement prices for derivative contracts on expiry.
The regulator said it has closely monitored the functioning of CAS and its impact on the market during its first month of operation. It has also engaged with stock exchanges, brokers, proprietary traders, software vendors, mutual funds, industry associations and foreign portfolio investors to facilitate smooth implementation and address operational issues.
Feedback received through multiple channels, including social and other media platforms, has highlighted the determination of settlement prices of derivative contracts on expiry based on the CAS-determined closing price as a significant area of concern.
The CAS framework was introduced after extensive stakeholder consultations and policy deliberations, including two rounds of public consultation in December 2024 and August 2025, as well as discussions with stock exchanges, broker associations, institutional investors and other market participants.
The benchmark Nifty has seen a sharp divergence from the Sensex following the launch of CAS. Although the gap narrowed over time, concerns have emerged over a sharp decline in derivatives trading volumes.
The objective of introducing CAS was to improve the accuracy, fairness and robustness of closing-price determination. Under the earlier volume-weighted average price (VWAP) framework, large trades executed near the close of trading could have a greater influence on the closing price.
