Jefferies views Sebi’s latest proposals to change the Closing Auction Session (CAS) as positive for exchanges and brokers after the newly introduced system triggered massive market volatility and spooked investors. However, the brokerage remains negative on BSE shares.
On Saturday, Sebi proposed two options for determining expiry-day settlement prices for index and stock derivatives. The consultation paper also proposed changes to the timing of the continuous trading session (CTS), CAS and derivatives trading, along with additional measures to improve the new session.
Jefferies on Monday highlighted that CAS, which was introduced by Sebi in August, initially resulted in higher losses for domestic prop traders due to volatility in index prices during the last hour on expiry day. Sebi’s latest consultation paper addressed concerns around CAS by changing settlement price of derivatives to volume weighted average (VWAP) or a blend between VWAP and CAS, discontinuing cancellations of limit orders placed beyond +/- 1% of reference price during CAS, reducing concerns around manipulation of settlement price, and unexecuted iceberg orders may be transitioned to CAS, increasing liquidity during the CAS window, the international brokerage said.
Also read | Sebi proposes new CAS framework, two options for expiry-day settlement
“Our discussions with domestic prop traders indicate the return to VWAP-based derivative settlement price along with inability to cancel limit orders placed beyond +/-1% threshold should reduce end of period volatility on expiry days,” Jefferies said, noting that the last date to submit responses to Sebi’s consultation paper is October 3, so the implementation will likely be from October or November this year.
While options premium turnover and orders were adversely impacted during August 2026, both have recovered in September so far as option traders had a better understanding of CAS, according to the analysts.
Why Jefferies remains negative on BSE share price?
Despite its positive view on the latest proposals on CAS, Jefferies remains negative on BSE. It maintained its ‘Underperform’ rating on the shares of Asia’s oldest stock exchange, with a target price of Rs 2,940 apiece, implying more than 13% downside potential from the stock’s previous closing price of Rs 3,384 apiece.The international brokerage’s negative stance on BSE shares is driven by the overall options industry barely growing over the past two years, while market-share gains appear to be nearing a ceiling, with expiry-day Sensex and Nifty ADTO now at similar levels.
Further, RBI’s tightening of bank guarantee norms could adversely impact premium turnover by up to 10% over the next year, it said, adding that BSE will also potentially undergo a management transition by June 2027.
Also read | Explained: What Sebi’s proposed CAS changes mean for expiry-day trading and settlement
Why Jefferies prefers Groww share price?
Jefferies thinks Groww is a better way of playing India’s equity story. It should also benefit from CAS issues being resolved as F&O accounts for around 55% of the company’s revenues, it said. “We believe the company has several levers to drive 30% PAT CAGR over FY26-29,” Jefferies said, adding that is driven by an 18% growth in broking business led by client vintage and market share gains, new initiatives like margin trading facility and wealth management, and 10pp margin expansion.
Further, Groww is adding US stocks later in FY27, which the international brokerage estimates could add 5-9% to FY28 earnings. Jefferies has a ‘Buy’ call on the shares of Groww-parent Billionbrains Garage Ventures and a target price of Rs 240 apiece, implying nearly 20% upside potential from the stock’s previous closing price of Rs 200.24 apiece on NSE.
What is CAS?
Stock exchanges introduced the new CAS system from August 3, changing the way closing prices are calculated for stocks included in the futures and options (F&O) segment. Under CAS, continuous trading in stocks that also have F&O contracts ends at 3:15 pm. However, this does not mean these stocks are closed for the day 15 minutes before the broader market shuts.
From 3:15 pm onwards, these stocks move into the CAS, a 20-minute auction process that runs until 3:35 pm to determine their official closing prices. Meanwhile, stocks that are not part of the F&O segment continue to trade as usual until 3:30 pm.
During the 20-minute auction window, buy and sell orders for eligible stocks are collected and matched at a single equilibrium price. This mechanism is aimed at improving price discovery and reducing the impact of last-minute trades on closing prices.
Also read |Jefferies’ 25% CAGR club: Paytm, Groww among 5 financial stocks that can deliver up to 25% returns
Disclaimer: This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an Investment Adviser. Debaroti Adhikary and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.