India’s Market Regulator Partially Reverses Derivative Settlement Rules

SEBI is set to pause the use of closing auctions for derivatives settlement for one year, opting for a volume-weighted average price to curb volatility.

Editorial Desk

October 16, 2026 One Min Read

POLICY WIRE — Mumbai, India — The Securities and Exchange Board of India (SEBI) is preparing to partially roll back its recent overhaul of the mechanism used to determine closing prices for key stocks and derivative contracts.

According to two sources familiar with the situation, the regulator intends to suspend the use of closing auctions for calculating derivatives settlement prices for a minimum of one year. This shift comes as a direct response to concerns regarding significant price fluctuations observed on expiry days.

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Under the revised approach, the regulator will transition to using the volume-weighted average price (VWAP) derived from the final 30 minutes of regular trading sessions to settle expiring stock and index derivatives. The closing auction mechanism will remain in place specifically for less-liquid underlying stocks.

The decision marks a notable adjustment to the new framework that the Securities and Exchange Board of India originally introduced in August. The move aims to stabilize market conditions following the implementation of the updated settlement protocols.

Reporting by Policy-Wire (PW)

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