Stock market: CAS-linked formula on hold? SEBI backs 30-minute VWAP for expiry settlement, says report

The Secondary Market Advisory Committee (SMAC) of markets regulator Securities and Exchange Board of India (SEBI) has reportedly recommended retaining the existing volume-weighted average price (VWAP) methodology for determining the settlement price of index and stock derivatives on expiry days, Moneycontrol reported. The panel has opposed an immediate shift to a blended formula that incorporates closing auction session (CAS) prices, Moneycontrol reported quoting sources.

A Reuters reported had, a week ago, suggested that the volume-weighted average price of the last ​30 minutes of trading could instead be used to determine the derivative pricing and that the regulator may implement the changes this month.

SEBI had earlier said that its initial experience with CAS and feedback received from various stakeholders and market participants highlighted the need to review a few aspects related to CAS and the settlement methodology for derivatives. It subsequently came out with a consultation paper on September 12 to seek public comments on certain operational aspects of the CAS framework.

CAS was introduced in the equity cash segment for stocks on which futures and options (F&O) contracts were available, with effect from August 3, 2026. The objective was to facilitate efficient and transparent price discovery of the closing price of securities.

Under the second option of SEBI's September 12 consultation paper, the settlement price was to be calculated using the VWAP of trades executed between 3 pm and 3:30 pm during the continuous trading session (CTS). The committee has recommended retaining this method for at least a year before the regulator considers switching to a new methodology, the Moneycontrol report said.

The recommendation came after market participants raised concerns following the introduction of CAS for stocks in the futures and options (F&O) segment on August 3. The mechanism replaced the earlier closing-price process with an auction-based system, triggering concerns over price volatility and the impact of auction-derived prices on derivatives settlement.

SEBI's consultation paper had proposed two options: a blended VWAP incorporating trades executed during the final 30 minutes of continuous trading and the 10-minute auction, or retaining the CTS-only VWAP as an interim arrangement.