Sebi's CAS rule change bigger positive for brokers vs exchanges: Jefferies

Capital market regulator Securities and Exchange Board of India (Sebi) has revised the Closing Auction Session (CAS) framework, addressing key concerns surrounding the derivatives settlement. The regulator has changed trading timings and the methodology for determining settlement prices of stock and index derivatives contracts.

Following the move, Jefferies in a note said that the decision to change the methodology for calculating settlement prices of index derivatives on expiry days to the volume-weighted average price (VWAP) is a bigger positive for brokers versus exchanges.

This will reduce expiry-day volatility under CAS and could lead to a recovery in trading activity, "benefiting brokers whose orders remain below pre-CAS levels", Jefferies said.

It added that the earnings upside for exchanges may be limited even if premium turnover returns to pre-CAS levels.

Jefferies favours Groww

The brokerage has recommended a 'Buy' rating on Billionbrains Garage Ventures, which operates retail investment and wealth management platform Groww.

What Sebi has changed

Sebi's revised framework for the CAS includes change in trading timings, and the methodology for determining settlement prices of stock and index derivatives contracts.

According to Sebi circular, under the revised framework, the 10-minute closing auction session will operate from 3:30 to 3:40 PM on all trading days. Trading in index and stock derivatives will continue until 3:45 PM, with certain exceptions for expiring index derivatives contracts.

A key change pertains to the settlement of expiring derivatives contracts. This will now be based on a Volume Weighted Average Price (VWAP) methodology using the last 30 minutes of continuous trading.

The new methodology would take effect from December 7, 2026.

Sebi had introduced the CAS framework in August to determine the closing price of securities. The development to revise CAS settlement norms comes after Sebi received over 20,000 comments on its consultation paper on the mechanism that had resulted in a sharp volatility in the markets at the fag-end and a decline in the trading volumes in futures and options (F&O).

“SEBI's latest decision is a constructive step towards balancing efficient closing-price discovery with stability in derivatives settlement. Retaining the 30-minute VWAP methodology addresses a key concern around expiry-day pricing, while shortening the CAS to 10 minutes should make the closing process more streamlined. The revised reference-price calculation and clearer order-transition rules further refine the framework," Sudeep Shah, head - technical and derivatives research at SBI Securities, said.