SEBI Rewrites Derivatives Rules: VWAP Returns to Boost Indian Market Volumes

In a significant move to calm volatile markets and revive trading activity, India's market watchdog, the Securities and Exchange Board of India (SEBI), has revised its contentious Closing Auction Session (CAS) rules. Crucially, it's bringing back the 30-minute Volume Weighted Average Price (VWAP) mechanism for settling derivatives on expiry days, reversing a change made just two months ago that had drawn widespread criticism. These updated rules, largely effective from December 7, 2026, aim to bring more stability and boost participation in the Indian derivatives segment. SEBI decision comes after the initial CAS framework, introduced on August 3, 2026, sparked concerns among traders and brokers over sharp price swings and a noticeable drop in liquidity, with overall derivatives trading volumes plummeting by 23% in August alone. Industry experts like Sneha Poddar, Vice President at Motilal Oswal Financial Services (MOFSL), believe these changes could improve market activity and ease pressure on capital market stocks. Beyond trading, SEBI is also pushing for greater transparency by working to include bank deposits and insurance policies in the broader Consolidated Account Statement (CAS), giving investors a clearer, all-in-one view of their financial health. Looking ahead, market participants should brace for the phased implementation of these rules, with most changes impacting trading and settlement taking effect in early December, while new guidelines for handling unexecuted orders will follow in February 2027. This pivot signals SEBI responsiveness to market feedback and its commitment to fostering efficient price discovery and orderly market functioning. The focus now shifts to how effectively these revisions will reignite trading volumes and strengthen the capital market ecosystem in India.