SEBI Advisory Panel Recommends Retaining 30-Minute VWAP for Derivatives Expiry Settlement for One Year

In a significant relief to domestic market participants and derivatives traders, the Secondary Market Advisory Committee (SMAC) of the Securities and Exchange Board of India (SEBI) has favoured retaining the existing 30-minute Volume-Weighted Average Price (VWAP) framework for settlement on expiry days for at least one year.

The advisory panel opposed an immediate migration to a blended formula or relying on the Closing Auction Session (CAS) to calculate settlement benchmarks for index and stock derivatives. Under the existing mechanism, final settlement prices on expiry days are determined using trades executed during continuous trading between 3:00 PM and 3:30 PM.

Backlash Against Closing Auction Volatility

The recommendation follows widespread market pushback against the newly introduced CAS framework, which participants blamed for abnormal price distortions and sharp volatility spikes on expiry days due to thin liquidity during auction matching.

SEBI had earlier floated a 17-page consultation paper proposing options to reform the mechanism:

• Option 1: A blended model combining the continuous 30-minute VWAP with prices discovered during a 10-minute closing auction window.
• Option 2: Reverting fully to the standard 30-minute VWAP of continuous trading between 3:00 PM and 3:30 PM, removing CAS entirely from derivatives expiry calculations.

The consultation closed on October 3, 2026, drawing over 20,000 stakeholder comments from institutional desks, brokers, and retail investors—far exceeding initial expectations and underscoring deep apprehensions across Dalal Street.

Extended Trading Hours on the Table

Beyond maintaining the 30-minute VWAP for settlement, the advisory panel has proposed structural adjustments to trading hours. Under the proposals discussed:

• Cash market trading would continue until 3:30 PM.
• Expiring derivatives contracts would cease trading at 3:30 PM.
• Non-expiring derivatives contracts would be permitted to trade until 3:45 PM.

While derivatives settlement is poised to retain the 30-minute VWAP for at least a year, the closing auction mechanism may continue to operate for cash-market stocks, particularly less-liquid scrips.

What It Means for Traders and Investors

For Indian retail and proprietary option writers and futures traders, the decision to maintain the 30-minute continuous VWAP eliminates unpredictability during the closing minutes of weekly and monthly contract expiries. The auction-based system had raised risks of spoofing and sharp slippages just before settlement.

The panel's recommendation will now be evaluated by the SEBI board before final circulars are notified, bringing clarity to a contentious issue that dominated market discourse over the past month.

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