From mint · Apoorva Ajith · · 1m
Sebi Reintroduces VWAP for Derivatives Expiry
Sebi returns VWAP pricing to calm expiry-day volatility after CAS caused sharp swings.
In brief
Sebi returns VWAP pricing to calm expiry-day volatility after CAS caused sharp swings. Sebi reintroduces volume-weighted average price for derivatives expiry days to reduce price swings caused by the auction system. Originally reported by mint.
Sebi Reintroduces VWAP
Sebi reintroduces volume-weighted average price for derivatives expiry days after CAS caused price swings.
“CAS, introduced in August, led to abrupt price swings on expiry day, making it difficult for traders to participate in the futures and options (F&O) segment”
VWAP vs CAS
VWAP takes price and volume into account while CAS uses an auction to match orders and derive closing prices.
“Unlike a simple average, VWAP takes into account both the price and volume of trades”
Market Reaction
Market participants urged Sebi to retain VWAP-based pricing on expiry days and introduce blended pricing on non-expiry days.
“Many market participants have urged Sebi to retain VWAP-based settlement pricing on expiry days”
Operational Changes
Sebi reduced transition period between continuous trading to CAS from five minutes to one minute, with CAS running from 3:30pm to 3:40pm.
“For the rest of the market, Sebi has reduced the transition period between continous trading (CTS) to CAS from five minutes to one minute”
Implementation Timeline
Unexecuted iceberg orders move to CAS as limit orders starting 8 February 2027, with full implementation by 7 December.
“Unexecuted iceberg orders would now move to to CAS as limit orders, unless the trader opts out of it”
Why This Matters
Sebi's move aims to reduce volatility and ensure smoother trading in derivatives markets during expiry periods.
“Sebi reviewed the framework through a consultation paper in September, following pushback from market participants over a liquidity squeeze during the auction”
What it means
Sebi reintroduces volume-weighted average price for derivatives expiry days to reduce price swings caused by the auction system.
