The Securities and Exchange Board of India (Sebi) is considering reverting to the volume-weighted average price (VWAP) mechanism for settling derivative contracts on expiry days, following feedback on the newly introduced closing auction session (CAS). This change aims to reduce price distortions observed during settlement days.
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Key takeaway
Sebi may revert to VWAP for expiry-day derivative settlement after feedback on the closing auction session.
- Step 1 · The triggerSebi considers reverting to VWAP for expiry-day derivative settlement, changing the price calculation method on NSE and BSE.
- Step 2 · Knock-onThe VWAP mechanism reduces expiry-day price distortions, leading to more stable settlement prices for derivative contracts.
- Step 3 · Reaches youSMEs and other market participants using derivatives for hedging face lower risk of settlement-driven losses, improving the reliability of hedging strategies.
The trigger is reported by the source below. The steps that follow are Branch²’s traced reasoning — how the shock could reach a business like yours, not a prediction.
Source: LiveMint Markets
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