SEBI to review derivative settlement price methodology after CAS rollout
SEBI had introduced CAS with effect from 3 August 2026 for determining the closing price of securities. Before CAS, the closing price of eligible stocks was determined using the volume-weighted average price (VWAP) of trades executed during the last 30 minutes of continuous trading. Under the new mechanism, the closing price is determined through a dedicated auction session, designed to aggregate buy and sell interest and improve price discovery.
Under the CAS framework, the closing price determined through the auction also serves as the basis for determining settlement prices for derivative contracts on expiry. This link between the cash-market closing price and derivatives settlement has emerged as a key area of concern for market participants.
The regulator said the CAS framework was introduced after extensive stakeholder consultations and policy deliberations, including two rounds of public consultation held on 5 December 2024 and 22 August 2025. SEBI also held discussions with stock exchanges, broker associations, institutional investors, market participants and other stakeholders before finalising the framework.
Since the implementation of CAS, SEBI has engaged with stock exchanges, brokers, proprietary traders, software vendors, mutual funds, industry associations and foreign portfolio investors to facilitate its smooth adoption and address operational issues.
SEBI said it monitored the functioning of CAS and its market impact during its first month of operation and received feedback and suggestions from market participants through multiple channels, including social media and other media platforms.
A significant area of feedback relates to the determination of settlement prices of derivative contracts on expiry based on the closing price determined through CAS.
The review comes after sharp price movements were witnessed around expiry-day auctions. On 3 September, the indicative Sensex close briefly fell about 2.5% during the CAS, while premiums on some BSE Sensex put options surged by 400%-500%. The Sensex subsequently recovered to close 0.55% lower at 76,152.86.
The episode has intensified scrutiny of the interaction between the cash-market auction and the large derivatives market, particularly on expiry days when the closing price can have a direct impact on derivative settlement. Market participants have also raised concerns about volatility and liquidity during the auction window.
After considering the initial experience with CAS and the feedback received from stakeholders, SEBI said it may propose changes to the methodology for determining settlement prices of derivative contracts. The regulator plans to issue a consultation paper on the proposed changes in about a week.
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