SEBI Proposes Major Changes: New Settlement Prices, Market Timings Up for Debate
GS3Economy · S&T · Environment · Security· Capital markets & SEBI· Prelims·
Market integrity and price discovery: a GS3 topic on regulatory frameworks in financial markets.
Why in news
SEBI has proposed two options for determining expiry-day settlement prices for index and stock derivatives to improve auction functioning and market transparency.
Background
SEBI proposed two settlement methodologies: 'Blended VWAP' (combining last 30 mins of CTS and 10 mins of CAS) and 'CTS VWAP' (last 30 mins of CTS only). Public comments are invited by October 3, 2026.
Facts for Prelims
- BodySEBI: Securities and Exchange Board of India, the regulator for securities markets.
- FactBlended VWAP: Based on trades during the last 30 minutes of Continuous Trading Session (CTS) and 10 minutes of Call Auction Session (CAS).
- FactCTS VWAP: Based only on trades during the last 30 minutes of CTS; proposed as an interim methodology.
- FactPublic comment deadline: October 3, 2026.
Prelims practice question
Which session is included in the calculation of the 'Blended VWAP' settlement price?
- (a)Call Auction Session
- (b)Limit Order Session
- (c)Dark Pool Session
- (d)Pre-Open Session
Show answer
Answer: (a) Call Auction Session — The Blended VWAP methodology combines the last 30 minutes of the Continuous Trading Session and 10 minutes of the Call Auction Session.
For Mains
Q. Discuss the significance of standardized settlement price methodologies in ensuring market integrity and liquidity in the Indian derivatives market.
Dimensions to cover in your answer
- Market Integrity: Reducing price manipulation during the transition from Continuous Trading Session to Call Auction Session.
- Liquidity Dynamics: Balancing the weight of high-frequency trades in CTS versus the price discovery of the CAS auction.
- Regulatory Transition: Managing market participant familiarity with auction mechanisms to ensure orderly price discovery.
Keywords: Securities and Exchange Board of India · Derivatives · VWAP · Call Auction Session · Market Integrity · Price Discovery
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