The announcement came on a day when the Sensex again saw a sharp intraday swing of over 1,000 points during expiry day trade before ending up just 138 points, erasing the day’s losses.
Pandey also said global index provider MSCI acknowledged that its recent rebalancing went well under the new CAS structure.
The final auction saw large institutional flows during the MSCI rebalancing in late August. Turnover in the final NSE auction rose to Rs 39,718 crore, or nearly 22% of the total cash market turnover, as passive funds adjusted portfolios in line with changes in the MSCI index.
Impact of CAS volatility on Sensex, Nifty remains a matter of concern
The bigger concern for traders is not whether CAS can handle the volumes, but whether it causes sharp price swings on expiration days.
On Thursday, the major indexes recovered late in the session after another volatile close. The Sensex rose over 1,000 points from the day’s low during the expiry day move but closed only 138 points higher. The sharp swing has brought attention back to CAS and its impact on the final settlement prices of derivatives.
Since the introduction of CAS, traders have complained that sudden price changes at the closing auction can lead to large movements in index options, especially on expiration days. For Sensex and Nifty derivatives, this concern is magnified as the closing price in the cash market is factored into the settlement price of expiring contracts. CAS was introduced to replace an earlier system in which the closing price was based on a volume-weighted average of the price of trades over the last 30 minutes of continuous trading. Under CAS, orders are collected after the regular session and matched at a single closing price.
Also Read: Wild CAS Swings: Sensex Soars 1000 Points on Expiry Day but Ends Just 138 Points Higher
Sebi says this improves the price discovery process and brings India closer to global market practices. Critics say the system needs stricter safeguards because a few large orders during an auction can dramatically move indicative prices, creating sudden gains and losses for options traders.
Sebi revises settlement price method
While Sebi has ruled out doing away with CAS, it has already started reviewing how derivatives settlement prices should be calculated once the new system is implemented. Earlier this month, the regulator said it would review the settlement pricing methodology for derivatives contracts in light of the implementation of CAS. Sebi said that the CAS came into force on August 3, 2026 and the closing price detected through the CAS is currently used to determine the settlement prices of derivatives on expiry days.
The regulator said it has received significant feedback from market participants on CAS-based settlement prices. He also held discussions with exchanges, brokers, retail traders, software providers, mutual funds, industry associations and foreign portfolio investors.
Sebi is expected to issue a consultation paper on this issue. The review may consider whether derivatives should continue to be settled based on the closing price determined by CAS, or whether a separate method is needed to reduce shocks on the expiration day.
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