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Business & Stocks Livemint Markets & Economy • Oct 15, 2026

SEBI Considers Blended Pricing Framework to Curb Derivative Expiry-Day Volatility and Liquidity Squeeze

💡 Key Takeaways

•SEBI is reviewing a blended pricing framework to reduce derivatives expiry-day volatility.
•The regulatory move follows severe liquidity squeezes reported during recent settlement auctions.
•A consultation paper issued in September formed the basis for these upcoming policy changes.

NEW DELHI [NCRBuzz Wire] — **The Securities and Exchange Board of India is actively evaluating a blended pricing framework designed to counteract severe expiry-day volatility and liquidity compression within the equity derivatives segment.** Following extensive industry consultations initiated via a September consultation paper, regulatory authorities are responding directly to systemic friction reported by institutional and retail market participants during weekly and monthly options expiry auctions.

### Regulatory Scope and Market Impact

**Market participants previously flagged acute liquidity squeezes during settlement windows, prompting SEBI to redesign execution mechanics.** The proposed blended pricing mechanism seeks to distribute pricing discovery more evenly, insulating exchanges and clearing corporations from sudden intraday spikes and structural margin stress.

| Regulatory Metric / Parameter | Details |

|---|---|

| Primary Regulator | SEBI (Securities and Exchange Board of India) |

| Policy Instrument | Blended Pricing Framework Consultation |

| Core Objective | Curb Expiry-Day Volatility & Liquidity Squeeze |

| Trigger Event | September Consultation Paper & Participant Pushback |

### Industry Consultation and Next Steps

**Stakeholder feedback gathered from brokers, algorithmic trading desks, and institutional funds remains central to shaping the final regulatory circular.** SEBI's imminent policy adjustments are projected to recalibrate how option premiums are valued during terminal settlement hours, ensuring market integrity without stifling legitimate hedging volumes.

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🏛️ Background Context

The derivatives segment in India has witnessed exponential growth in retail and institutional participation, frequently triggering severe intraday price swings on weekly expiry dates. SEBI's regulatory intervention reflects ongoing efforts by financial authorities to balance systemic risk containment with efficient capital allocation.

💡 Citizen & Commuter Quick Explainer (FAQ)

Q1: What triggered SEBI's review of the derivatives pricing framework?

Market participants reported severe liquidity squeezes and extreme price volatility during auction settlement windows, prompting regulatory intervention.

Q2: What is the primary objective of the proposed blended pricing framework?

The framework aims to curb expiry-day volatility and distribute pricing discovery evenly to protect exchanges and traders from structural margin stress.

Q3: When was the initial consultation paper on this framework released?

SEBI reviewed the initial framework through a formal consultation paper published in September.

Verified Wires: Livemint Markets & Economy Original Wire Dispatch ↗

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