Discuss the measures needed to curb expiry-day volatility in India's equity derivatives market while protecting retail investors.

On expiry day, a single settlement price decides the final payout on every open futures-and-options (F&O) contract. Linking this price to the new Closing Auction Session (CAS) [2] meant that one auction moment decided all payouts. SEBI has now moved derivatives settlement back to a 30-minute average price [1], but lasting stability needs a wider package.

Why expiry day endangers retail investors

• Leverage: near expiry, a small price move can wipe out an option's value. 93% of individual F&O traders lost money in FY22–FY24, over ₹1.8 lakh crore in total [3].
• Manipulation: SEBI's Jane Street interim order impounded about ₹4,843 crore of alleged gains from moving index prices on expiry days [4].

Measures: market design

• Robust settlement price: a volume-weighted average price (VWAP) over the last 30 minutes of trading is harder to move than a one-moment auction price [1].
• Separate functions: keep CAS for cash-market closing prices [1]. Link derivatives to the auction again only after it shows steady depth.
• Calibrated session timings and settlement methods, as reviewed in SEBI's 2026 consultation [5].

Measures: surveillance and enforcement

• Real-time monitoring by exchanges of large cash orders placed to sway expiry prices, as directed in the Jane Street case [4].
• Strict enforcement of anti-manipulation (PFUTP) rules, with swift impounding of gains [4].
• Continue SEBI's October 2024 curbs on expiry-day overtrading in index options [4].

Measures: retail protection

• Prominent loss-probability warnings and investor education built on SEBI's own loss data [3].
• Suitability checks and tighter margins for small, frequent option buyers.

Measures: governance

• Evidence-led rules: consultation let SEBI change course within weeks [5]. During the review period it should publish the price gaps between the auction and VWAP.
• Hedger mismatch: cash now closes at the CAS price and derivatives at VWAP [1]. This gap needs a fix.

Curbing expiry-day volatility therefore needs a sturdy settlement price, sharp surveillance and strong retail safeguards working together. A phased, data-driven approach, testing auction depth before linking derivatives to it again, can balance price discovery with stability. This fits SEBI's statutory mandate under the SEBI Act, 1992 to protect investors and develop the securities market.