EconomySEBI proposes a new way to set derivatives settlement prices on expiry days
The regulator wants closing-auction prices and VWAP to play a larger role, aiming to reduce distortion and improve settlement accuracy.
THE INDIQA Research DeskPublished 12 Sept 2026Updated 12 Sept 20261 min read
SEBI has proposed changes to the way settlement prices are determined for index and single-stock derivatives on expiry days. The plan would use a combination of the Closing Auction Session and volume-weighted average prices.
Expiry-day settlement matters because very large derivatives positions can create incentives for sharp price moves near the close. A more robust methodology can reduce the influence of short-lived volatility and improve confidence in the final settlement price.
SEBI has also proposed changes to the closing-auction process, including a tighter price band and a shorter post-auction window in the derivatives segment.
CIVIL SERVICES VIEWStudy this development
GS-IIICapital-market regulation and derivativesPrelims: HighMains: Medium
Why this matters
SEBI proposed changes to derivatives expiry-day settlement pricing.
Key facts
- SEBI regulates India's securities market.
- VWAP stands for Volume-Weighted Average Price.
Key terms
- SEBI
- derivatives
- VWAP
- closing auction
- settlement price
Arguments, challenges and policy responses
- Market integrity
- Regulatory design for derivatives
- Managing manipulation risk near expiry
India’s context
India has one of the world's largest retail derivatives markets, making expiry-day design especially consequential.
Keep in mind
Derivatives settlement methodology is not the same as changing the underlying company's market value.
Practice question
Why does settlement-price design matter for market integrity in derivatives markets?
Revision summary
- SEBI regulates India's securities market.
- VWAP stands for Volume-Weighted Average Price.
- Market integrity
- Regulatory design for derivatives
- Managing manipulation risk near expiry
DISCUSSION & EDITORIAL REVIEW
Join the discussion
Comment on the story, report a factual or editorial issue, or tell us whether the article was useful.
Comments
Public comments appear after editorial review.
Was this article useful?
Tell us in one tap. Details are optional.
Report a problem with this article
