India regulator to review derivatives settlement methodology after 2.5% auction swing

  • SEBI will review derivatives settlement-price methodology after feedback on India’s closing auction session.
  • 2.5% was the brief decline in the benchmark index’s indicative close on Thursday.
  • SEBI said it would issue a discussion paper on proposed changes within a week.

India’s Securities and Exchange Board of India (SEBI), the country’s market regulator, will review how settlement prices for derivatives contracts are determined after feedback on the closing auction session in the equity cash market. Launched on August 3 to establish securities’ closing prices, the session exposed differences between exchanges’ index closes, sharp options-price volatility and concerns about possible manipulation, especially when benchmark derivatives expire. SEBI said it would propose changes and publish a discussion paper within a week. Indian equities have experienced sharp moves during the session, including a brief 2.5% drop in the indicative close of India’s benchmark stock index on Thursday, according to BSE’s website. Premiums on some BSE Sensex put options rose between 400% and 500% during the auction.

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