Stories
SEBI Reviews Derivative Rules, Aims for Trust-Driven Capital Markets: Pandey
- •SEBI Chairman Tuhin Kanta Pandey emphasizes the need for trust-driven capital markets that mobilize capital, manage risk, and inspire confidence.
- •SEBI is reviewing derivative expiry settlement rules, specifically concerns related to the settlement price framework on expiry days, following the introduction of the Closing Auction Session (CAS).
- •The regulator aims for deeper, more liquid cash markets, wider participation, stronger securities borrowing and lending, and efficient hedging to improve price discovery.
- •SEBI is examining position limits for non-agricultural contracts to boost liquidity and depth, and considering a phased approach for physical settlement in some agricultural commodities.
- •Measures taken include widening FPI access to non-agricultural commodity derivatives, simplifying IPO disclosures for retail investors, and reintroducing open market buybacks.
Key Questions Answered
SEBI is examining concerns and proposing changes related to the settlement price framework for derivatives on expiry days following the rollout of the Closing Auction Session (CAS) mechanism, offering options like a blended VWAP formula or reverting temporarily to the last 30 minutes of continuous trading.
The Closing Auction Session uses a call-auction window at the end of the trading day to execute buy and sell orders simultaneously at a single equilibrium price, improving price discovery instead of relying solely on a Volume-Weighted Average Price calculation.
SEBI allowed Foreign Portfolio Investors to participate in non-agricultural commodity derivatives, subject to safeguards around delivery and position exits, aiming to broaden institutional participation and strengthen price discovery.
