Sebi's derivatives settlement rule change favours brokers over exchanges

The Securities and Exchange Board of India's (Sebi) move to adopt volume-weighted average price (VWAP) methodology for calculating settlement prices of derivatives contracts on expiry days has emerged as a more significant positive development for brokers compared to exchanges, market observers noted.

The regulatory shift in settlement mechanics is anticipated to reshape dynamics in the Indian derivatives market, with broking houses positioned to gain a competitive edge through the new pricing framework. The VWAP-based approach is designed to enhance price discovery and reduce potential manipulation risks during contract settlement periods.

Exchanges, while benefiting from improved market integrity and operational efficiency, are not expected to see proportional gains relative to broking firms under the new regime. The structural change reflects Sebi's ongoing efforts to strengthen market microstructure and protect investor interests.

The implementation of the VWAP settlement methodology represents another step in Sebi's broader initiative to modernise India's derivatives market infrastructure and align it with international best practices. Market participants are closely monitoring how the new rules will influence trading volumes and settlement patterns across the country's derivatives exchanges.