SEBI said on Thursday it would review the methodology for determining settlement prices of derivatives contracts after receiving feedback on the closing auction session in the equity cash market.
The Securities and Exchange Board of India had launched the closing auction session on August 3 to determine the closing prices of securities.
But the rollout highlighted issues such as divergent index closing levels across exchanges, volatile options pricing, and concerns over potential manipulation, particularly on days when benchmark derivatives contracts expire.
The regulator said it has received feedback from various stakeholders, and would propose certain changes in the methodology for determining settlement prices of derivative contracts.
SEBI would also issue a discussion paper outlining the proposed changes within a week.
Indian equities have seen sharp moves during the newly launched closing auction session, particularly on derivatives expiry days.
On Thursday, indicative close for benchmark stock index briefly dropped 2.5%, according to BSE’s website. This caused premiums on some of BSE Sensex’s put options to spike between 400% and 500% during closing auction.