India's Securities and Exchange Board of India has reverted to calculating derivatives settlement prices based on the final 30 minutes of trading, abandoning a recently implemented closing auction system that generated measurable volatility concerns.
The regulator introduced the new auction-based mechanism to improve price discovery and reduce manipulation risk by extending the settlement window. But market participants documented increased price swings and unpredictable movements during the auction period on expiry days—data that prompted SEBI to reverse course and restore the prior 30-minute average method.
The shift directly affects how futures and options contracts are finalized on expiration dates, influencing final instrument valuations and investor margin positions. The mechanism change reflects a core regulatory trade-off: price discovery improvements that introduce destabilizing volatility may outweigh the efficiency gains they promise.
