India’s securities regulator is set to restore a method that relies on the final 30 minutes of trading to settle equity derivatives on expiry days, according to people familiar with the matter, effectively delinking the new closing auction from settlement of futures and options.

By Samie Modak At a meeting held Thursday, a group set up by the Securities and Exchange Board of India recommended that settlement prices for index and stock derivatives on expiry day be based on the volume-weighted average price over that period, the people said, asking not to be identified because the discussions are private.

The regulator accepted the recommendation and will soon issue a circular implementing the change, they said. A SEBI spokesperson didn’t immediately respond to a request for comment.

Moneycontrol reported the development earlier on Thursday. Continuous trading in stocks covered by the closing auction will run until 3:30 p.m. local time, bringing their market close in line with that of other securities, the people said. The 10-minute closing auction will run until 3:40 p.m. NSE’s equity derivatives contracts expire on Tuesdays, while those on BSE expire on Thursdays.

The move would mark a return to the settlement methodology used before SEBI introduced the closing auction in August. The revised framework is expected to remain in place for at least a year, the people said.

The change is aimed at limiting the impact of unusually sharp auction moves on expiring contracts. SEBI began reviewing the framework after market participants raised concerns about expiry-day settlement prices and the interaction between the cash and derivatives markets.

The regulator’s consultation paper had proposed two alternatives for derivatives settlement: reverting to the earlier VWAP methodology or using a combination of VWAP and the closing-auction price.