BSE Shares Rise After SEBI Signals Review of Derivatives Settlement Rules

BSE shares climbed nearly 5% on September 4 after the Securities and Exchange Board of India (SEBI) announced that it would review the methodology used for settling derivatives contracts following concerns over the newly introduced Closing Auction Session (CAS).The BSE stock opened higher at Rs 3,400 compared to the previous close of Rs 3,306. The stock further jumped to Rs 3,474, which is over 5% higher than the previous close.At around 10:45 am, the stock was trading 4.4% higher. The market regulator launched the CAS on August 3 to determine official closing prices of stocks. However, the new mechanism faced challenges, including differences in index closing levels between exchanges, sharp movements in options prices and concerns over possible price manipulation, especially on derivative expiry days.SEBI Bans Copthall Mauritius, Mansi Broking Over Alleged CAS Manipulation; Freezes ₹3.67 Crore Gains SEBI reviews settlement price mechanismSEBI said it had received feedback from multiple market participants and was considering changes to the method used for calculating derivative contract settlement prices.A key concern raised by stakeholders was the use of CAS-determined closing prices for settling derivatives contracts on expiry days. The regulator said it would release a discussion paper within a week outlining possible modifications.Following the announcement, BSE shares were trading 4.5% higher at ₹3,453.8 apiece during morning trade.Market participants have flagged concerns over low liquidity during the closing auction process. On Thursday, the indicative closing level of the Sensex briefly declined 2.5%, according to BSE data, leading to a sharp rise in premiums for some Sensex put options.Liquidity concerns emerge after CAS rolloutBSE Managing Director and CEO Sundararaman Ramamurthi said participation in the closing auction session remained limited due to liquidity challenges. He said dealers had suggested separating futures and options expiry from CAS and introducing the system gradually.Other suggestions included restricting order modifications during the auction process. BSE said it was compiling feedback from market participants before presenting recommendations to regulators.

Sebi plans to review the methodology for setting derivative settlement prices on expiry after market participants raised concerns over the new Closing Auction Session (CAS). The regulator will issue a consultation paper next week.

The review comes after the CAS began in the equity cash segment on August 3. Under the framework, the closing price determined through the auction also serves as the basis for determining settlement prices for derivative contracts on expiry.

The review comes after the CAS began in the equity cash segment on August 3. Under the framework, the closing price determined through the auction also serves as the basis for determining settlement...