SEBI has tabled a set of amendments to the cash settlement (CAS) framework that governs how expiry‑day prices for index and stock futures and options are derived. The regulator is offering two alternative methods: a weighted average of the last five minutes of the continuous trading session (CTS) or the price that emerges from the post‑market auction. Both aim to replace the current practice of using the closing price of the underlying index.
In tandem, SEBI proposes to trim the CTS by a few minutes so that the auction starts earlier, and to tighten order‑type rules around the expiry window. These tweaks are intended to curb last‑minute price spikes that have historically led to settlement disputes and heightened volatility in the Nifty and Sensex derivatives markets. For the average retail trader, the changes could mean more predictable settlement values and reduced risk of unexpected losses on hedged positions.
However, intraday participants who rely on the final minutes of CTS for arbitrage may need to adjust strategies, as the window for price discovery will shrink. The proposals are still subject to public comment and final approval, but if implemented they are likely to bring greater transparency to expiry‑day pricing and could improve overall market confidence for Indian investors.