Brokerage firm Jefferies said that the proposals made by the Securities and exchange board of India (SEBI) to change the determination of settlement prices in index and single stock derivatives through the closing auction session (CAS) removes uncertainty and is therefore positive for brokerages and exchanges. In a report released on Monday, the brokerage said that the regulator’s proposals to determine settlement prices using volume weighted average price (VWAP) or a blend between VWAP and CAS along with discontinuation of limit order cancellations beyond +/- 1% of reference price during CAS and transition of unexecuted iceberg orders into the closing auction can address issues impacting market participants like volatility on expiry days and possible manipulation of settlement prices.
The brokerage expects the proposal to lead to a VWAP-based method implemented in October or November 2026. “Our discussions with domestic prop traders indicate the return to VWAP-based derivative settlement price along with inability to cancel limit orders placed beyond +/-1% threshold should reduce end of period volatility on expiry days,” it said. The market participants expected the issues around CAS to be resolved, added the brokerage, as indicated by expectations of rise in average daily derivative turnover for H2FY27.
Despite the possibility of resolution of the issues around CAS, the brokerage expects BSE to underperform due to stagnant growth of the options industry in the last two years and the market share of the exchange reaching a ceiling. The unfavourable verdict was due to the brokerage’s expectation of a negative impact of up to 10% on the premium turnover of the exchange over the next year due to tightening of norms on bank guarantees by Reserve Bank of India (RBI) along with a potential management transition in June 2027.
On the other end, the brokerage expects Groww to benefit substantially if the issues around CAS gets resolved due to about 55% of its revenue from derivative trading. It expects Groww to increase its net profit at 30% CAGR in the FY26-29 period due to growth in broking business from existing clients and increase in market share, new initiatives like margin trading facility (MTF) and wealth management, margin expansion by 10 percentage points and addition of US stocks later in FY27.