Stock exchanges and clearing corporations have issued a joint standard operating procedure (SOP) for settlement price computation following the rollout of the closing auction session (CAS) in the equity segment, setting out a uniform framework across both exchanges.
The SOP, aligned with regulatory directions, details how settlement prices will be computed under different trading scenarios, with a shift towards auction-driven price discovery at the close.
“For stocks where CAS is applicable… Stock Exchange shall provide the traded quantity in the CAS and the equilibrium price,” the SOP said.
Where equilibrium price and traded quantity are available from both exchanges, the settlement price will be based on the volume-weighted average price (VWAP) of the prices discovered.
“If Equilibrium price & Quantity is provided by more than one Stock Exchange, then VWAP of such prices shall be considered as settlement price,” it said.
If data is available from only one exchange, that price will be adopted. All settlement prices will be rounded to two decimal places using standard mathematical rounding.
In scenarios where no trades occur during the closing auction session but the stock has traded during the day, the reference price will be used as the close. “In such a scenario the Stock Exchange shall provide the Reference Price as the close price,” the SOP said.
If the stock remains illiquid through both the day and the auction session, the previous day’s settlement price will be carried forward.
For stocks where CAS is not applicable, the earlier framework remains in place. Settlement prices will be based on the VWAP of the last 30 minutes of trading where activity exists, or the last traded price (LTP) where it does not.
The SOP also sets out norms for the equity derivatives segment. For contracts traded in the final 30 minutes, VWAP-based pricing will continue to determine the daily settlement price. In the absence of trades in that window, theoretical pricing models will be used.
On expiry, stock derivatives will take the final settlement price from the equity segment, while index derivatives will use the closing index value published by the exchanges.
The introduction of CAS and the accompanying SOP are aimed at improving price discovery and ensuring consistency in settlement practices across both exchanges and market segments.