The Securities and Exchange Board of India is set to review the methodology used to calculate settlement prices for derivative contracts following the nationwide introduction of the Closing Auction Session. Acting on operational feedback gathered during the initial rollout, the capital markets regulator plans to publish a consultation paper within about a week to propose revisions to how final prices are established when futures and options contracts expire.
Feedback Mounts Over Expiry Pricing Framework
The capital markets watchdog implemented the Closing Auction Session framework across the equity cash segment on August 3, 2026, establishing a dedicated mechanism to discover final daily closing values. Under the present regulatory setup, closing figures derived through the auction window automatically determine expiry-day settlement calculations across the derivatives market. However, the reliance on these cash closing levels to settle derivative commitments prompted widespread representations from brokers, traders, and institutional desks seeking adjustments.
Prior to implementation, the regulator conducted extensive stakeholder consultations, including formal public review rounds in December 2024 and August 2025. Follow-up discussions brought in stock exchanges, broker associations, institutional funds, and operational partners. Over the course of the first month under the new framework, official monitoring revealed persistent friction points, with industry participants voicing operational grievances through direct communications, industry bodies, and public platforms regarding the current expiry calculation model.
Exchanges Confront Slump in Market Volumes
Simultaneously, trading desks have recorded a noticeable contraction in overall market activity since the framework took effect in early August. Data indicates that both premium turnover and derivative contract counts have slipped between 10% and 20% compared to levels recorded in July. The slowdown across both the cash and equity derivatives segments has prompted market infrastructure institutions to intervene and gather frontline insights.
The Bombay Stock Exchange has initiated formal outreach sessions with registered market dealers to evaluate the sharp decline in overall turnover. BSE Managing Director and Chief Executive Officer Sundararaman Ramamurthy stated that the exchange intends to present dealer observations directly to supervisory authorities. Ramamurthy observed that the volume drop appears connected to muted engagement during the 15-minute closing auction interval, prompting efforts to pinpoint underlying structural causes and recommend operational refinements.
Consultation Paper to Address Industry Concerns
SEBI engaged extensively with stock exchanges, brokerage firms, proprietary trading outfits, software vendors, mutual fund houses, and foreign portfolio investors to evaluate early operational bottlenecks. While the regulator recognized the necessity of stabilizing price discovery, it acknowledged that market concerns over derivative expiries warrant targeted methodological adjustments.
The impending consultation document will formally present the suggested modifications for stakeholder evaluation, giving market participants an avenue to submit formal comments. The eventual regulatory outcome is anticipated to reshape final-day settlement dynamics across the futures and options landscape, as authorities and exchanges seek to balance transparent closing discovery against healthy liquidity in derivative trading.
