SEBI to Revisit Derivatives Settlement-Price Methodology After CAS Rollout; Consultation Paper Due in About a Week

The Securities and Exchange Board of India (SEBI) has said it will review the methodology used to determine settlement prices for derivative contracts after the rollout of the Closing Auction Session (CAS) in the equity cash market. The regulator’s announcement, issued on September 3, 2026 as Press Release No. 53/2026, is significant because the closing price discovered through CAS currently feeds directly into expiry settlement for derivatives.

What SEBI has announced

SEBI’s official press-release page confirms that the regulator is reviewing settlement-price methodology for derivative contracts in light of the CAS rollout. Current market reports citing the SEBI release say the regulator expects to issue a consultation paper in about a week, with the review focused on the way derivative contracts are settled on expiry rather than on abandoning the CAS framework itself.

The Closing Auction Session was introduced in the equity cash segment from August 3, 2026. The mechanism is intended to improve the quality and transparency of end-of-day price discovery by replacing the earlier closing-price approach with an auction-based process for eligible securities. Under the current framework, the CAS-derived cash-market closing price also affects the settlement price of stock and index derivative contracts on expiry.

Why the settlement-price methodology is under review

Market participants have raised concerns about sharp price movements during the auction window, especially on expiry days, because a late move in the cash-market closing price can have an immediate effect on the final settlement value of derivatives. Reports on SEBI’s September 3 statement say the regulator has been monitoring the first month of CAS implementation and has received feedback from a wide set of stakeholders, including exchanges, brokers, proprietary traders, software vendors, mutual funds, industry associations and foreign portfolio investors.

The key distinction is that SEBI has not announced the withdrawal of CAS. The proposed review is narrower: whether the methodology for using the CAS-discovered closing price to determine derivative settlement values should be modified. Any actual regulatory change would follow the consultation process and would need to be set out through a formal SEBI decision or circular.

What the consultation could matter for

For brokers, clearing members, treasury teams, fund managers and finance professionals who monitor derivatives exposure, the settlement-price methodology directly affects expiry-day valuation, profit and loss recognition, margin outcomes and operational reconciliations. Even a change that leaves the CAS mechanism untouched could alter how final settlement prices are calculated, which in turn may require updates to trading systems, valuation controls, risk models and end-of-day procedures.

Accountants and finance teams at entities with listed-derivative exposures should therefore treat the expected consultation paper as a document worth reviewing rather than assuming the present settlement mechanics will continue unchanged. The most relevant issues will be the precise benchmark proposed for expiry settlement, whether any averaging or reference-price approach is introduced, the effective date, and whether transitional provisions are provided for open positions.

What happens next

SEBI is expected to place the proposed methodology in the public domain through a consultation paper. Until that paper is issued and a final regulatory decision follows, the existing CAS and derivative settlement framework remains the operative position. Market participants should avoid treating the review announcement itself as a change in settlement rules.

For CA firms advising brokers, listed entities, funds or proprietary trading businesses, the practical next step is to track the consultation paper and assess whether any proposed change would affect valuation policies, treasury controls, derivative accounting inputs, exchange reconciliations or internal risk documentation.

SEBI has opened the door to a targeted redesign of derivative expiry settlement after the first month of the Closing Auction Session. The immediate development is a review, not a rule change. The next high-value document will be SEBI’s consultation paper, expected in about a week, which should reveal whether the regulator proposes to decouple or modify the current link between CAS closing prices and derivative settlement values.

Official source: View the official source document

Key takeaway

Same-day SEBI regulatory development with immediate relevance to brokers, funds, derivatives users and finance professionals.