SEBI considers derivatives settlement and margin reforms

The Securities and Exchange Board of India (SEBI) is considering several regulatory adjustments to the derivatives market. SEBI Chairman Tuhin Kanta Pandey announced that the regulator intends to address concerns regarding expiry-day settlement prices and the rollout of the Closing Auction Session (CAS).

To determine settlement prices for index and single-stock derivatives, SEBI has proposed two options: a blended volume-weighted average price (VWAP) combining the last 30 minutes of continuous trading with the 10-minute CAS, or maintaining the existing methodology based solely on the last 30 minutes of continuous trading. Other proposals include delinking derivatives settlement prices from cash market closing prices and discontinuing live indicative index values during the CAS.

Additionally, SEBI is examining the rationalisation of margin requirements for longer-tenure derivative products. The goal is to encourage healthier, long-term participation in the futures and options (F&O) segment while ensuring investor protection. Pandey emphasized that the regulator aims to make markets easier to access and increase liquidity without compromising market trust or increasing risks for retail investors.