SEBI panel favours 30-minute VWAP for expiry settlement for at least a year

Three sources familiar with the deliberations said the SEBI panel’s 30-minute VWAP expiry settlement proposal favoured retaining the existing 3 pm–3:30 pm continuous trading session VWAP method for expiry settlement for at least a year instead of adopting a formula linked to closing auction session prices.

SEBI panel backs the existing VWAP settlement method for a year

For index and stock derivatives on expiry days, the proposed settlement price would continue to use the VWAP of trades executed between 3 pm and 3:30 pm in the continuous trading session, according to three sources familiar with the committee’s deliberations.

This continuous-session-only method would remain in place for at least a year before any transition to another methodology, the same sources said.

SEBI’s September 12 consultation paper listed a blended calculation based on trades from the final 30 minutes of continuous trading and the 10-minute closing auction as an alternative to retaining the existing VWAP method.

SEBI panel proposes CAS stocks trade until 3:30 pm and derivatives until 3:45 pm

Normal trading in stocks covered by the closing auction session would continue until 3:30 pm under the proposed schedule, three sources familiar with the deliberations said.

After a one-minute transition period, the closing auction session would run from 3:31 pm to 3:40 pm. Derivatives trading would be permitted until 3:45 pm, according to the same sources.

SEBI leaves market-order treatment unresolved

SEBI has not resolved how market orders would be treated during the closing auction session and is undertaking further work on the issue, according to three sources familiar with the committee’s deliberations.

Market participants raised concerns that large market orders placed and cancelled during the auction could affect the indicative equilibrium price, the sources said.

SEBI panel favours indicative equilibrium price display during the closing auction

Continuing to display the indicative equilibrium price during the closing auction session was favoured by the committee, three sources familiar with the deliberations said.

SEBI’s consultation paper said a security-level indicative equilibrium price shows the price at which buy and sell orders in an individual stock could potentially match. An indicative index value derived from those prices is a calculation and does not represent executed trades, the paper said.

Iceberg orders get 3:30 pm or 3:40 pm validity

Iceberg orders would be permitted to remain valid until either 3:30 pm or 3:40 pm under the committee’s proposal, according to three sources familiar with the deliberations.

For an iceberg order valid until 3:40 pm, the full quantity would be visible to the market during the closing auction session, the sources said.

SEBI’s consultation paper described iceberg orders as orders that allow traders to display only part of a large total quantity at a time.

CAS began for futures-and-options stocks on August 3

The consultation followed the introduction of the closing auction session, or CAS, for stocks in the futures-and-options segment on August 3, according to three sources familiar with the committee’s deliberations.

This auction-based closing process replaced the earlier closing-price process and led to feedback about auction-derived prices and derivatives settlement, the sources said.