Sebi Implements 30-Minute VWAP for Derivatives Settlement Starting December 2026
The Securities and Exchange Board of India announces a revised settlement framework for derivatives, effective December 7, 2026.
Sebi's new framework introduces a 30-minute VWAP method for derivatives settlement.
The changes will take effect from December 7, 2026, with specific provisions for iceberg orders starting February 8, 2027.
Consultations led to over 20,000 suggestions, influencing the final decision.
In a significant update for the trading community, the Securities and Exchange Board of India (Sebi) has announced a new framework for the closing auction session (CAS) that will implement a 30-minute volume-weighted average price (VWAP) method for derivatives settlement. This change is set to take effect on December 7, 2026, and aims to enhance the transparency and efficiency of the settlement process.
The revised CAS framework will also adjust trading hours, with a new 10-minute session from 3:30 PM to 3:40 PM on all trading days. The order-entry period will conclude randomly between 3:38 PM and 3:40 PM. Notably, trading in index derivatives will continue until 3:45 PM, while contracts expiring on the same day will cease trading at 3:30 PM. The changes come after extensive consultations with market participants, reflecting a strong preference for the 30-minute VWAP method due to its familiarity and operational clarity.
Under the new guidelines, the settlement price for index derivatives will be determined based on the VWAP of the underlying securities during the last 30 minutes of the continuous trading session (CTS). Clearing corporations will be responsible for calculating these prices and will provide real-time indicative values to market participants. Additionally, unexecuted iceberg orders will transition to fully disclosed limit orders unless participants choose to opt out.
The CAS framework, which was initially implemented on August 3, faced criticism regarding settlement prices and liquidity issues. The latest revisions were prompted by a consultation paper that garnered over 20,000 suggestions, highlighting the need for a more effective settlement mechanism. Sebi's Secondary Market Advisory Committee deliberated on these suggestions before finalizing the new framework.
Looking ahead, market participants are keenly awaiting the implementation of these changes, particularly the transition of unexecuted orders from the CTS to CAS, which will begin on February 8, 2027. The adjustments are expected to improve trading conditions and enhance market liquidity, addressing previous concerns raised by traders and brokers about the operational challenges of the earlier framework.
