SEBI CAS Review Lifts BSE and Broker Shares

Angel One jumped 8% to Rs 308 and BSE as much as 5% to Rs 3,474 on September 4 after SEBI said it may change how expiry-day derivatives settle. Groww rose more than 3% to Rs 196 and Motilal Oswal more than 2% to Rs 1,038. The regulator did not say it would scrap the Closing Auction Session.

The move is narrower than the tape implies. SEBI is opening the method that turns a 20-minute cash auction into the settlement print for futures and options, after one month in which that print became too wild for option writers to stay in the last half-hour.

SEBI Opens Expiry Settlement for a Rewrite

SEBI said on September 3 that it had sat with exchanges, brokers, proprietary desks, software vendors, mutual funds, industry groups and foreign portfolio investors through the first month of CAS. A large share of that feedback pointed at one joint: using the CAS close as the expiry settlement price for derivative contracts.

Having considered the experience of the initial period of CAS implementation and the feedback received from various stakeholders, Sebi may be proposing certain changes in the methodology for determination of settlement prices of derivative contracts for which a consultation paper will be issued in about a week.

SEBI, statement, September 3, 2026

That sentence is the whole policy shift on offer. The auction still sets the cash close for F&O stocks. Index funds still need that close. What SEBI has put in play is the second use of the same number, as the price that settles options on expiry.

The January 16 circular on closing auctions had hard-wired that second use. It told clearing corporations that index settlement would rest on the closing price of the index constituents, and that stock derivatives would settle on a volume-weighted average of those cash closes across exchanges. CAS went live on August 3, 2026. Four weeks later the regulator is asking whether that glue should stay.

Exchanges already moved a smaller piece on September 3. They said the reference price for stock and index futures in the late window would rest on the volume-weighted average of trades between 3:00 pm and 3:15 pm, the last quarter-hour of continuous dealing, not on the auction that follows. That is a pre-auction print. The consultation paper due in about a week is where SEBI decides whether expiry settlement follows the same path.

The Sensex Dropped 2,137 Points in Three Minutes

Thursday, September 3, was Sensex weekly expiry, the first such Wednesday-to-Thursday cycle of September. At 3:18 pm the index was at 76,510. By 3:20 pm the indicative close had fallen to 74,373, a drop of 2,137 points, before it clawed back about 1,800 points. The Sensex finished at 76,152.86, down 417.49 points, or 0.55%, from 76,570.35. The Nifty closed at 23,873.45, down 41 points, or 0.17%.

THURSDAY’S AUCTION PRINTS

The 76,600 put rose 337%. The 76,400 put rose 447%. Those are not prices a writer can hedge in a cash book that has already stopped continuous trading. Gaurav Arora, head of research at SAHI, put Thursday’s plunge on a large one-sided sell order hitting an almost empty book.

The same pattern showed up on August 27, the monthly F&O settlement day, when the Sensex slid from about 77,200 at 3:17 pm to nearly 74,983 at 3:23 pm. Former MP Kirit Somaiya asked SEBI to suspend and redesign the session after that print. SEBI did not suspend it. It waited through one more weekly expiry, then offered a consultation on settlement method.

Option Writers Left the Last Half-Hour

Jefferies titled its September 2 note “Capital Markets Monitor: August Was All About CAS.” Equity option contracts traded fell 30% month on month. Index-options premium average daily turnover fell 20% to Rs 53,900 crore, the lowest since February 2025. The auction pool was only around 1% of cash-market ADTO, so a modest imbalance could shove the indicative close around.

The brokerage’s talk with an options trader found the same behaviour desks had already adopted: uncertainty on expiry day was forcing writers to stay away, which cut liquidity and hurt proprietary P&L. Rajesh Palviya, head of research at Axis Securities, said brokers had been squaring off around 3:05 pm to 3:10 pm, and that algos, prop desks, scalpers and arbitrageurs were choosing to sit out the auction rather than risk a thin-margin book in a window they could not delta-hedge.

EQUITY DERIVATIVES ADTV IN AUGUST

Combined average daily turnover of Rs 346.9 trillion was a 14-month low, and the sharpest month-on-month drop since December 2024. BSE took the heavier hit because Sensex weekly options had been the growth engine; its index-options premium share slipped to 34.7%, and Sensex premium ADTO fell 27%, partly because August had one fewer expiry. BSE’s cash ADTO also fell 26% to Rs 18,700 crore, even as its cash-market share rose 50 basis points to 8.1%.

Groww’s parent, Billionbrains Garage Ventures, saw equity-derivatives premium turnover drop 24% in August. Client addition held up, which is why Jefferies still had the stock on its preferred list. The listed brokerages that live on retail F&O, and the exchange that had been winning Sensex options share, do not have that cushion.

Why BSE and Broker Shares Jumped

BSE had already told the market that CAS had cut volumes. The stock slipped more than 3% on September 2, to an intraday low of Rs 3,131, then recovered 4.4% on September 3 to close at Rs 3,306.1 after the SEBI statement. The September 4 gap-up took it from Rs 3,168 across two sessions to a high of Rs 3,474, a 9.7% rebound. Angel One had closed September 3 at Rs 285.95, up 2.4%, before the 8% extension.

FRIDAY’S CAPITAL-MARKET TAPE

• Angel One: Up 8% to Rs 308, among the top Nifty 500 gainers.
• BSE: Up as much as 5% to Rs 3,474 after Wednesday’s volume scare.
• Groww: Up more than 3% to Rs 196, even after a 24% drop in F&O premium turnover.
• Motilal Oswal: Up more than 2% to Rs 1,038, with Nuvama also higher.

The Nifty Capital Markets index rose 1.8% to 5,453.35 from 5,357.20. Sensex itself opened September 4 at 76,657.02, up 504.16 points, so some of the bid was beta. An 8% print in Angel One against a 0.66% open in the benchmark is not beta. It is the market paying up for a chance that Sensex and Nifty options volumes come back if expiry is no longer chained to a 20-minute call auction.

Venkatachalam Shunmugam of MCQube said CAS is here to stay, and that SEBI is more likely to tighten bands, pull in more participation, and study a special session for derivatives expiry than to kill the auction. That reading matches the September 3 statement. Anyone buying BSE or Angel One as a CAS rollback is buying a sentence SEBI did not write.

Passive Funds Filled the Auction NSE Wanted

The cash-market half of the design did what the circular described on a day that mattered. On August 31, the first MSCI rebalance after go-live, NSE printed CAS turnover of Rs 39,718 crore (about $4.2 billion), 99.9% of the auction, 22% of that day’s cash turnover, with more than 98,000 unique investors. That session was about 42 times the prior day’s CAS turnover, because index funds and ETFs had to trade at the close.

NSE’s first-month CAS turnover of Rs 63,000 crore (about $6.6 billion) carried a 98.2% share. Sriram Krishnan, NSE’s chief business development officer, called the rebalance-day flow “a strong endorsement of the mechanism” and thanked index funds for using it. Industry cash ADTO was flat in August after two months of decline. The broken piece is not the pool for passive rebalance. It is the decision to let that same pool, on ordinary expiry days when the pool is around 1% of cash ADTO, write the settlement of the options market.

SEBI had listed that dual use on purpose. The circular said a fair close matters “especially since it is used as the reference for settlement in derivatives, index computation, mutual fund net asset value (NAV) determination.” Passive money needs one number. Option writers need a number they can hedge. Those two jobs collided once continuous trading in F&O stocks stopped at 3:15 pm and the derivatives book ran on to 3:40 pm against a call auction they could not see as a live market.

BSE’s June operating guidelines set that clock in public: continuous trading ends at 3:15 pm, a five-minute reference-price transition, order entry, a random stop between 3:28 pm and 3:30 pm, matching until 3:35 pm, and a +/- 3% band around the 3:00 pm to 3:15 pm VWAP. Stop-loss and iceberg orders die at the threshold. Indicative equilibrium, imbalance and an indicative index flash while the book is still forming. On a full MSCI day those screens fill. On a weekly Sensex expiry they can gap 2,137 points on a one-way lot.

Jefferies Named Three Fixes Before SEBI Spoke

Two days before SEBI’s statement, Jefferies had already listed the plumbing it thought would restore writers without abandoning the auction. The overlap with what SEBI has now put on paper is the first item.

THE THREE CHANGES JEFFERIES FLOATED

• De-link expiry: Take options expiry out of the CAS window so settlement is not a function of a thin 20-minute cash auction.
• Stock lending: Improve the stock-lending and borrowing book so hedges can be put on when the cash close jumps.
• Deeper pool: Pull more flow into the auction so a single sell order cannot move the Sensex 2,137 points.

A deeper pool is the cash-market job, and August 31 showed it can be done when passives must trade. Stock lending is a separate market-structure fight. De-linking expiry is the item Friday’s bid is paying for, and it is the only item SEBI has put in a consultation timetable.

The auction has already attracted an interim enforcement case. SEBI named Mansi Share and Stock Broking and Copthall Mauritius Investment, a JPMorgan-owned FPI, over alleged Sensex auction-window trades, and imposed a combined Rs 3.7 crore penalty. The regulator has argued that a call auction makes this kind of tape easier to reconstruct than a 30-minute VWAP. Traders arguing the other way say a +/- 3% band and free cancellation in a 1% pool also make a close easier to shove. Both can be true. Neither is what SEBI has offered to rewrite next week.

The Clock SEBI Still Has to Untie

CAS was not a surprise. It went through two public papers, the Secondary Market Advisory Committee, and a January circular that gave exchanges six months to build the session. The complaint that has force is the one Piyush Chaudhry, a trader, put to SEBI in early September: a 2% to 3% index print on thin supply is not “collective market consensus,” which is the test the circular set for itself. The consultation paper does not have to concede that point. It only has to decide whether options should still be cashed out at that print.

HOW THE SETTLEMENT FIGHT WAS BUILT

1. December 5, 2024: First public consultation on a closing auction for cash-market stocks.
2. August 22, 2025: Second paper, after comments from exchanges, clearing corporations, funds and FPIs.
3. January 16, 2026: SEBI circular ties the new cash close to derivative settlement and sets an August 3 start.
4. August 3, 2026: CAS goes live for F&O stocks; continuous trading in those names stops at 3:15 pm.
5. August 31, 2026: MSCI rebalance day; NSE’s auction handles Rs 39,718 crore, the session working as designed for passives.
6. September 2, 2026: Jefferies publishes the August volume damage and names de-linking expiry as the first fix.
7. September 3, 2026: Sensex weekly expiry swings 2,137 points in the auction; SEBI says a settlement-method paper will follow in about a week.

Until that paper is out, the 3:15 pm stop still hands the cash close to a call auction, and that close still settles the options. BSE and the brokers are priced for the second of those facts to change. The first one is the part SEBI has not put up for a vote.

Disclaimer: This article is news reporting and analysis of SEBI’s September 3 statement, exchange volume data and listed share moves. It is informational only and is not investment advice, a research recommendation, or an offer to buy or sell BSE, Angel One, Groww, Motilal Oswal, Nuvama or any other security. Readers should consult a SEBI-registered adviser or their own broker before acting on any price move linked to a consultation paper that has not yet been issued. Figures and session rules reflect the circulars, exchange notices and market prints cited here as of September 4, 2026, and can change when the consultation paper appears or when SEBI issues a final circular.