Sebi proposes two options to address expiry-day volatility in derivatives
GS3Economy · S&T · Environment · Security· Capital markets & SEBI· Prelims·
Market regulation and liquidity management: a relevant GS3 topic on capital market integrity.
Why in news
Sebi proposed two options to determine expiry-day settlement prices for index and stock derivatives to mitigate volatility during the Continuous Trading Session (CTS).
Background
Sebi's proposal includes changes to the timing of the Continuous Trading Session (CTS) to enhance liquidity. The measures are intended to address volatility issues arising from the Continuous Auction Session (CAS) introduced in August.
Facts for Prelims
- FactCAS: Continuous Auction Session introduced in August to manage derivative settlements.
- FactCTS: Continuous Trading Session timing is subject to proposed changes by Sebi.
Prelims practice question
Which session was introduced in August to manage derivative settlements?
- (a)Margin Trading Session
- (b)Intraday Settlement Window
- (c)Continuous Auction Session
- (d)Spot Trading Session
Show answer
Answer: (c) Continuous Auction Session — The note states that the Continuous Auction Session was introduced in August to manage derivative settlements.
For Mains
Q. Discuss the measures required to ensure market integrity and reduce extreme volatility in the Indian derivatives market.
Dimensions to cover in your answer
- Liquidity management: Balancing high-frequency trading demands with the need for stable settlement prices
- Regulatory oversight: Addressing systemic risks posed by high-leverage derivative instruments in retail portfolios
Keywords: market volatility · derivative settlement · liquidity enhancement · regulatory framework · capital market integrity
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This note is generated automatically from SatyaDheesh's news feed and mapped to the UPSC CSE syllabus. Check facts against the original report or PIB before using them in an answer.