SEBI to review CAS-based settlement price mechanism for derivatives

The Securities and Exchange Board of India (SEBI) is going to review the methodology for determining settlement prices of derivative contracts on expiry, with a consultation paper on proposed changes expected in about a week.

The move follows feedback from market participants on the Closing Auction Session (CAS) mechanism, introduced for determining closing prices of securities in the equity cash segment. The CAS-determined closing prices are also taken as the basis for settlement prices of derivative contracts on expiry.

Even on the Sensex expiry on Thursday, the put options spiked sharply after the index fell over 2,000 points in three minutes during the closing auction session before settling 400 points lower.

“Having considered the experience of the initial period of CAS implementation and the feedback received from various stakeholders, SEBI may be proposing certain changes in the methodology for determination of settlement prices of derivative contracts for which a consultation paper will be issued in about a week,” SEBI said in a press release late Thursday.

Since CAS took effect on August 3, 2026, SEBI said it had closely monitored its functioning and impact on the market during the first month of operation, receiving feedback through multiple channels, including social media and other platforms, from stock exchanges, brokers, proprietary traders, software vendors, mutual funds, industry associations and foreign portfolio investors (FPIs).

The regulator has also engaged with these stakeholders to facilitate smooth implementation and address operational issues arising during the initial adoption period.

The CAS framework itself was introduced after extensive stakeholder consultations and policy deliberations, including two rounds of public consultation in December, 2024, and August, 2025, along with discussions in an advisory committee and with stock exchanges, broker associations and institutional investors. Inputs from these consultations were examined and incorporated into the final framework, SEBI said.