SEBI panel backs 30-minute VWAP for F&O expiry settlement

A Securities and Exchange Board of India (SEBI) advisory panel has recommended continuing with the established 30-minute volume-weighted average price (VWAP) mechanism for derivatives expiry settlement, putting a proposed formula linked to the Closing Auction Session (CAS) on hold.

The Secondary Market Advisory Committee (SMAC) met to review responses to a consultation paper that drew approximately 20,000 comments by its 3 October deadline. Market participants overwhelmingly favoured keeping the existing settlement calculation rather than adopting a blended model that integrates auction window data.

Settlement options and market response

SEBI introduced the CAS mechanism for stock futures and options on 3 August 2026, aimed at improving closing price discovery. However, initial friction around the new session led to shifting trading activity and a brief dip in segment turnover.

In its consultation paper, the regulator presented two primary choices: a blended VWAP factoring in trades from both the final 30 minutes of continuous trading and the 10-minute closing auction, or retaining the existing 30-minute continuous trading VWAP for at least another year. Traders and institutional investors strongly backed the second option to maintain trading stability.

Derivatives trading activity across equity markets reflected this initial adjustment and subsequent recovery:

Ensuring stability in price discovery

The temporary drop in August turnover underscored the importance of smooth operational transitions. Once SEBI indicated it was open to reviewing the framework, market confidence revived rapidly, pushing turnover back up to ₹275.77 lakh crore in October.

Beyond the settlement formula, the advisory committee evaluated stakeholder comments on alternative trading schedules, indicative index values during auction sessions, and order-handling rules. Retaining the 30-minute VWAP ensures continuity for index calculations, derivatives settlement, and mutual fund net asset values, supporting orderly market functioning and predictable liquidity.