SEBI to Review Derivative Settlement Pricing After Market Volatility

The Securities and Exchange Board of India announced on September 3, 2026, that it will review the methodology used to determine settlement prices for derivative contracts. The move follows the August 3 rollout of the Closing Auction Session (CAS) in the equity cash market, which established the closing prices used for derivative settlements on expiry.

Market participants reported significant volatility and unstable options pricing during the first month of implementation. Traders highlighted potential manipulation and sharp price swings in the final minutes of trading. On September 3, the Sensex dropped approximately 2,100 points within three minutes, causing a spike in put options.

The regulator intends to release a consultation paper detailing proposed changes to the settlement-price framework within one week. SEBI clarified that the review focuses specifically on the settlement methodology rather than the CAS mechanism itself.