Sebi on Saturday proposed two options for determining settlement prices on the expiry day of index and equity derivatives. The consultation paper also proposes changes to the timing of the continuous trading session (CTS), CAS and derivatives trading, as well as additional measures to improve the new session.
Jeffries on Monday highlighted that the CAS, which was introduced by Sebi in August, initially resulted in higher losses for domestic traders due to volatility in index prices during the last hour on the expiry day. Sebi’s latest consultation paper has addressed concerns about CAS by changing the settlement price of derivatives to volume weighted average (VWAP) or a combination of VWAP and CAS, stopping cancellation of limit orders placed beyond +/- 1% of the reference price during CAS, reducing concerns about settlement price manipulation and transferring outstanding iceberg orders to CAS, which will increase liquidity during the CAS window. the international brokerage firm said.
Also read | Sebi proposes new CAS structure, two settlement options on the date of expiry
“Our discussions with domestic prop traders indicate that the reversion to VWAP-based settlement pricing of derivatives, as well as the inability to cancel limit orders placed beyond the +/- 1% threshold, should reduce end-of-period volatility on expiry days,” Jeffries said, noting that the last date for filing responses to Sebi’s consultation paper is October 3, so implementation is likely to happen in October or November this year.
According to analysts, while options premium turnover and orders were negatively impacted in August 2026, they recovered in September as options traders gained a better understanding of CAS.
Why is Jeffries still negative on BSE share price?
Despite his positive outlook on the latest CAS proposals, Jeffries remains negative on BSE. It maintained an “underperform” rating on the stock of Asia’s oldest stock exchange with a target price of Rs 2,940 apiece, implying potential downside of more than 13% from the stock’s previous closing price of Rs 3,384 apiece. Sensex and Nifty ADTO expiry are at similar levels now.
Moreover, RBI’s tightening of bank guarantee norms could negatively impact premium turnover by up to 10% next year, it said, adding that BSE could also potentially see a change in management by June 2027.
Also read | Clarification: What Sebi’s proposed CAS changes mean for trading and settlement on the expiry date
Why does Jefferies prefer share price growth?
Jefferies believes Groww is the best way to play out the Indian equity story. The company should also benefit from addressing CAS issues as F&O accounts for about 55% of the company’s revenue, it said. “We believe the company has several levers to achieve a 30% CAGR in PAT in FY26-FY29,” Jeffries said, adding that this is driven by 18% growth in its brokerage business driven by increased client count and market share, new initiatives such as margin trading facility and asset management, and 10 percentage point margin expansion.
Additionally, Groww will add US equities later in FY27, which international brokerages estimate could add 5-9% to earnings in FY28. Jeffries has a “buy” call on Groww’s parent company Billionbrains Garage Ventures and a target price of Rs 240 per piece, suggesting nearly 20% upside from the stock’s previous closing price of Rs 200.24 per piece on the NSE.
What is CAS?
Stock exchanges introduced a new CAS system from August 3, changing the way closing prices are calculated for stocks included in the futures and options (F&O) segment. According to CAS, continuous trading of shares that also have F&O contracts ends at 15:15. However, this does not mean that these stocks close for the day 15 minutes before the broader market closes.
Starting at 3:15 p.m., these stocks go into CAS, a 20-minute auction that lasts until 3:35 p.m. to determine their official closing prices. Meanwhile, non-F&O stocks continue to trade as usual until 3:30 p.m.
During the 20-minute auction window, buy and sell orders for eligible shares are collected and matched at a single equilibrium price. This mechanism aims to improve price discovery and reduce the impact of last-minute trades on closing prices.
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Disclaimer: This article is written by Debaroti Adhikari who is not a SEBI registered Research Analyst or Investment Advisor. Debaroti Adhikari and his/her “relatives” (as defined in Section 2(77) of the Companies Act 2013) have no financial interest in the companies mentioned in this article at the time of publication. The views/recommendations mentioned in this article, where applicable, are those of the respective SEBI registered Research Analyst/Brokerage Firm and are reproduced/expressed with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to review the original research report and make investment decisions based on their own assessment. Refusal from brokerage activities Here.