SEBI Nears Overhaul of Derivative Settlement Rules After Massive Public Feedback

India's market regulator, the Securities and Exchange Board of India (SEBI), is moving quickly to finalize new rules for how derivative contracts are settled on their expiry days. SEBI Chairman Tuhin Kanta Pandey announced today, October 3, 2026, that the regulator will 'soon' issue a final framework after receiving a huge response – over 20,000 comments – on its consultation paper regarding the Closing Auction Session (CAS) mechanism and derivative expiry rules. The public feedback period closed today, signaling a swift resolution to concerns raised after CAS was rolled out in August 2026. This urgent review comes after the introduction of CAS for Futures & Options (F&O) stocks in August 2026 led to worries about how it might affect the final prices used to settle derivative contracts. SEBI proposals have offered two main choices for these settlement prices: either a 'Blended VWAP' combining trades from both the continuous session and the auction, or keeping the older 'CTS VWAP' method for a while longer. The goal is to make India's capital markets more trustworthy, help money flow efficiently, and manage risks better, ultimately strengthening the link between regular share trading and derivative markets. Market participants should brace for a quick announcement, with Chairman Pandey stating a circular can be expected 'soon'. The new rules are set to bring clarity and stability to derivative settlements, potentially impacting trading strategies and market dynamics for F&O traders. Beyond this, SEBI is also actively working to make it easier for Foreign Portfolio Investors (FPIs) to invest in India and is looking to boost the market for corporate bond derivatives, aiming for a more robust and attractive Indian financial landscape.