India's derivatives trading volumes may recover after settlement rule changes, analysts say

By Vivek Kumar M Oct 16 (Reuters) — The Indian markets regulator's decision to revert to the volume-weighted average price method to determine settlement prices of derivatives contracts on expiry days could reduce volatility and helprevive volumes, according to analysts. The Securities and Exchange Board of India said that from December 7, derivatives contracts on expiry days will once again be settled using the volume-weighted average price of the last 30 minutes of regular trading. The move follows backlash from tradersamid sharp swings in stock and index ​levels after the closing auction session (CAS) was implemented on August 3, which prompted some to scale back on trading activity. Total derivatives turnover on the National Stock Exchange of India fell 19.2% month-on-month to 34.48 trillion rupees ($363.37 billion) in August, following the introduction of CAS. This added to a decline in volumes due to tighter regulations on lending to proprietary traders and higher transaction taxes. "This (changes to CAS) should reduce expiry-day volatility under the closing auction session, benefiting brokers whose orders remain below pre-CAS levels," brokerage firm Jefferies said. Analysts