Mumbai, September 12 (IANS). The Securities and Exchange Board of India (SEBI) is likely to release a consultation paper on the closing auction session (CAS) on Saturday. In this, the regulator may propose changes in the existing process of determining the settlement price of derivative contracts. This information was given in a report.
According to NDTV Profit report, this proposal is likely to be discussed in the SEBI board meeting to be held on September 24. This will address the concerns raised by market participants regarding the calculation of settlement price of derivatives on the expiry day under the new CAS mechanism.
SEBI does not plan to withdraw CAS but to improve the process of calculating the settlement price under the auction mechanism on expiry days.
Sebi Chairman Tuhin Kanta Pandey had earlier clarified that “the CAS framework will remain in the market” and the market regulator is trying to address the concerns raised by market participants by examining them.
Continuous trading in shares eligible for Futures and Options (F&O) under CAS, effective from August 3, ends at 3:15 pm. These securities are then sent to an auction lasting approximately 20 minutes, where the official closing price is determined by matching buy and sell orders.
At the same time, trading in non-F&O shares continues till 3:30 pm, while trading in stock and index derivatives continues till 3:40 pm.
During the new closing auction session, the Indian stock market witnessed sharp fluctuations, especially on the expiry days of derivatives.
The indicative close of the Sensex briefly fell 2.5 per cent during one session last week, leading to a 400-500 per cent jump in the premium of its put options during the closing auction. Similarly, on Tuesday also, Nifty put options saw manifold rise during trading on the expiry day.
Analysts say CAS has made trading less predictable for systematic options strategies on expiry day. He says that due to limited participation in the auction, only a few orders can make a big change in the closing price.
–IANS
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