New Delhi [India], October 16 (ANI): The Securities and Exchange Board of India's (SEBI) changes to the Closing Auction Session (CAS) framework should reduce expiry-day volatility and benefit brokers more than stock exchanges, according to a Jefferies report.

The report said the revised methodology for calculating the settlement price of expiring index derivatives removes uncertainty, while offering greater scope for recovery in brokers' order volumes.

"This should reduce expiry-day volatility under the Closing Auction Session (CAS), benefiting brokers whose orders remain below pre-CAS levels," Jefferies said.

However, the brokerage expects limited earnings upside for exchanges, as their premium turnover has already recovered.

"With premium turnover for exchanges back to pre-CAS levels, earnings upside may be limited," the report said.

The report also showed that orders traded per day were recovering from the August 2026 lows following the introduction of CAS, while industry index options premium average daily turnover had remained broadly flat since the November 2024 regulatory changes.

Under SEBI's October 15 circular, the settlement value of expiring index derivatives will be based on the underlying index calculated using the volume-weighted average prices (VWAP) of constituent securities during the last 30 minutes of continuous trading in the equity cash segment.

For expiring stock derivatives, clearing corporations will determine settlement prices using the underlying stock's VWAP during the last 30 minutes of continuous trading across all stock exchanges.

These changes will take effect from December 7, 2026.

The revised framework also provides for a separate 10-minute closing auction session from 3:30 pm to 3:40 pm, with order entry closing randomly between 3:38 pm and 3:40 pm.

Trading in index derivatives will continue until 3:45 pm, except for expiring contracts, which will stop trading at 3:30 pm on expiry days. Stock derivatives will trade until 3:45 pm, including on expiry days.

SEBI has also revised rules for carrying unexecuted orders into CAS. Eligible pending iceberg orders will move into the auction as fully disclosed limit orders unless participants opt out when placing the original order. The changes governing the transition of unexecuted limit and iceberg orders will take effect from February 8, 2027.

The regulator said the review aims to ensure efficient price discovery and orderly functioning of the cash and derivatives segments. (ANI)