EXCLUSIVE: India markets regulator to partly reverse derivative settlement rules after pushback, sources say
- SEBI retreating on new 'closing auction' rules after market chaos
- Derivatives settlement prices to return to volume-weighted average model
- Regulator flooded with 20,000 complaints as volatility spikes
- Changes expected by month-end to calm jittery traders
Brief Summary
India's market watchdog, SEBI, is performing a tactical retreat after its attempt to overhaul derivative settlement mechanisms backfired. The new 'closing auction' system—intended to mirror US and Hong Kong markets—triggered wild price swings, forcing the regulator to scrap the plan for derivative pricing. Instead, they are reverting to a volume-weighted average price of the final 30 minutes of trading to restore order.
Why This Matters
While this drama is unfolding in Mumbai, it serves as a stark reminder of the fragility in global derivative markets. If you hold positions in international funds or emerging market ETFs, these regulatory flip-flops can lead to unexpected volatility in the assets you own. When major regulators stumble while trying to 'modernize' financial plumbing, it creates ripple effects that can impact the stability of global portfolios and the efficiency of the markets where your retirement savings are deployed.