SEBI proposed changes to derivatives settlement methodology on September 12 following concerns about expiry-day behaviour after the closing auction session was introduced in August. The consultation considers alternative ways to calculate settlement and seeks comments by October 3. For Indian traders, the immediate lesson is to distinguish the last price on a chart from the price defined by a contract's settlement rules.
Why a weighted average can differ from the last trade
VWAP means volume-weighted average price: larger trades receive more weight in the calculation. One proposed approach blends trades from the final part of continuous trading and the closing auction; another uses the continuous-trading period alone. These are proposals under discussion, so an article about them does not replace the exchange's currently applicable contract specification.
Small differences can matter at expiry
If a hypothetical contract settles five points differently and each point is worth ₹50 for that position, the cash difference is ₹250. Actual lot sizes and settlement rules vary and must be checked for the specific instrument. A seemingly small price gap can become significant across several leveraged positions.
Before holding a position into expiry, record the applicable settlement method, lot size and exchange timetable. Watch for the final circular and implementation date rather than changing your assumptions on consultation day. A cleaner pricing process cannot remove leverage risk or guarantee that an order will execute at an indicative closing value.