SEBI Reviews Expiry Settlement Rules And Margins To Anchor Trust In Derivatives Market, Says Tuhin Kanta Pandey — October 3, 2026

The Securities and Exchange Board of India (SEBI) is actively reviewing the methodology for calculating expiry-day settlement prices in equity derivatives, aiming to establish a trust-driven market environment that prevents sudden price shocks. Speaking at industry gatherings, including the 11th JP Morgan India Conference and the 13th SBI Banking & Economics Conclave, SEBI Chairman Tuhin Kanta Pandey reiterated that the regulator is committed to refining market architecture without disrupting market activity.

"Ease of doing business and investor protection are not competing objectives," Pandey stated, emphasizing that regulatory oversight must reduce operational friction while maintaining integrity. "Our objective is therefore to make markets easier to access, while preserving the trust on which those markets are built."

Expiry-Day Settlement Overhaul

The ongoing review follows the rollout of the Closing Auction Session (CAS) in the cash equity segment for derivative-linked stocks on August 3. Under the framework, closing prices have been discovered through a 10-minute auction rather than the volume-weighted average price (VWAP) across the final 30 minutes of regular trade. However, using CAS-derived closing prices to settle expiring index and stock derivatives has drawn concern from market participants after sharp intraday swings—including single-session Sensex moves exceeding 1,000 points—surfaced on expiry sessions.

To address these distortions, SEBI floated a consultation paper proposing two primary settlement alternatives for public comment:

• Blended VWAP: Calculating settlement prices by combining transactions executed during the final 30 minutes of the Continuous Trading Session (CTS) and the 10-minute CAS, weighted purely by actual traded volume without assigning predetermined weights.
• Reversion to CTS VWAP: Temporarily or permanently retaining the traditional methodology, where only trades executed during the final 30 minutes of the Continuous Trading Session determine derivative settlement.

Alongside the settlement options, SEBI has suggested structural safeguards during the closing auction. These include delinking derivative settlement prices directly from cash-market closing prices, ending the live dissemination of indicative index values during CAS, and imposing stricter restrictions on cancelling orders placed beyond a 1% band from the reference price.

Focus on Market Stability and Margin Relief

Addressing broader futures and options (F&O) dynamics and retail risk exposure, Pandey confirmed that SEBI is also exploring potential margin rationalisation on longer-tenure derivative contracts to encourage sustainable, long-term hedging over speculative daily churning.

The SEBI chief noted that while CAS remains an essential structural reform that has successfully handled massive institutional flows during major index rebalancings, the regulator intends to eliminate unintended side effects. Pandey assured market participants that SEBI aims to provide structural stability and address operational friction systematically rather than reacting impulsively to weekly market movements.

Tags: SEBI NSE BSE Derivatives Capital Markets