SEBI plans to suspend the Closing Auction Session for derivatives and return to the 30-minute VWAP method by late October 2026. The move aims to curb expiry-day volatility, leading to a rally in shares of major stock exchanges and brokerage firms on Tuesday.
Indian capital market stocks saw a positive reaction on Tuesday following reports that the Securities and Exchange Board of India (SEBI) is preparing to partially reverse its recent derivatives settlement rules. The regulator is reportedly set to suspend the Closing Auction Session (CAS) for derivatives for at least one year. Instead, the settlement will revert to the 30-minute Volume-Weighted Average Price (VWAP) method, a shift expected to be implemented by late October 2026.
This decision comes after significant public feedback, with the regulator reportedly receiving over 20,000 comments regarding the new rules. The move is designed to address concerns about sharp price swings on expiry days, which had become a point of contention for traders. For instance, market observers pointed to a notable instance on September 29, 2026, when the Nifty experienced a 2.2% drop in its indicative closing price, sparking debates about the effectiveness of the auction-based mechanism.
For investors, this development is seen as a way to potentially stabilize trading volumes in the Futures and Options (F&O) segment. After the CAS mechanism was introduced in August 2026, many market participants observed a cooling in derivative volumes. Analysts believe that reverting to the familiar VWAP method could provide a more stable environment for both institutions and retail traders. While the CAS system is being removed for derivatives, it will continue to apply to less-liquid stocks in the cash market, where the auction helps ensure fair pricing.
Shares of major market intermediaries, including the Bombay Stock Exchange, Motilal Oswal Financial Services, and Angel One, moved higher during Tuesday’s session as traders reacted to the prospect of a more favorable trading environment. The broking and exchange sectors have been closely monitoring these regulatory shifts, as any change to the settlement process directly affects trading activity, which is a primary revenue driver for these companies.
Despite the market optimism, it is important to note that volatility is a natural part of the F&O market, and structural changes alone may not eliminate all risks. The underlying complexity of expiry-day trading remains, and investors should be aware that market sentiment is highly sensitive to regulatory announcements. Any delay or deviation from the expected October timeline could influence sentiment toward exchange and brokerage stocks. The immediate focus for the market will now be the official circular confirming these details and the transition to the new settlement method by the end of the month.