SEBI Restores Old Settlement Price Formula for Derivatives
SEBI restores the legacy VWAP formula for derivatives settlement on expiry days.
Key Highlights
SEBI reverts to the legacy settlement price formula for derivatives on expiry days to curb market volatility and ensure stable trading conditions.
The Securities and Board of India has officially announced the restoration of the legacy settlement price calculation formula for derivatives contracts on their respective expiry days. This regulatory adjustment comes in response to feedback from market participants who expressed concerns over the impact of the newer methodology on market stability and price discovery.
Understanding the Reversion to the Established Framework
By reverting to the established framework, the regulator intends to mitigate excessive volatility during the final hours of trading on expiry days, thereby fostering a more predictable environment for market participants. This decision reflects the regulatory body’s ongoing commitment to balancing market innovation with the necessity of maintaining orderly trading conditions.
- Securities and Exchange Board of India: The regulatory authority that announced the restoration of the legacy settlement price calculation formula.
- Traders and Investors: Market participants who expressed concerns over the impact of the newer methodology on market stability.
- IndiaIPO: The platform reporting on the regulatory adjustment and market feedback regarding derivatives contracts.
The transition aims to resolve concerns regarding the impact of the newer methodology on price discovery. Market participants had noted issues affecting stability during the final hours of trading on expiry days.