SEBI Restores 'Final 30 Minutes Of Trading' Method To Settle Derivatives

• Dushyant Sharma
• 17 Oct 2026
• 71 Views

The Securities and Exchange Board of India (SEBI) has decided to restore a method that relies on the final 30 minutes of trading to settle derivatives on expiry days. This decision follows concerns about sharp price fluctuations caused by the new closing auction process. 

Settlement Price Rules

The market regulator announced that the settlement prices for index and stock derivatives will be determined based on the volume-weighted average over a specified period. These changes will take effect on December 7. Bloomberg had previously reported on this proposed change. 

Additionally, trades executed during the closing auction will not be factored into the final settlement price of expiring futures and options. This decision aims to limit the effects of unusually sharp price movements during auctions on expiring contracts, especially after concerns arose about using auction prices for settling options contracts worth billions of dollars. 

Head of Equity Derivatives at Equirus Securities Pvt. Limited, Tejas Shah, stated, “SEBI has reverted to the tried-and-tested volume-weighted pricing mechanism, a move that should help restore trading volumes and bring participants back to the market.”

Review of Trading Framework by SEBI

The market watchdog initiated a review of the trading framework in September following feedback from market participants regarding settlement prices on expiry days and the relationship between cash and derivatives markets. 

Chairman Tuhin Kanta Pandey noted that the regulator had received approximately 20,000 comments on a discussion paper that proposed changes to the closing auction framework.

Changes in Trading Timings

As part of these changes, SEBI has reduced the transition period from continuous trading to the closing auction from five minutes to one minute. Trading for index and stock derivatives will continue until 3:45 PM, with the exception of expiring index contracts, which will cease trading at 3:30 PM. 

Continuous trading in stocks that are covered by closing auction will continue until 3:30 PM, aligning their regular market close with that of other cash securities. A 10-minute auction will take place afterward, lasting until 3:40 PM. Shah stated, "The curtailing of timings of auction on non-expiry days will bring back lost volumes.“

Source:- NDTV