Sebi mulls physical settlement of stock derivatives

Move to help improve alignment between cash and derivative markets

The Securities and Exchange Board of India (Sebi) on Thursday sought market feedback on moving to a physical-settlement system in stock derivatives. Currently, all derivatives contracts are cash-settled.

“Market participants are requested to provide their comments on whether there is a need to have compulsory physical settlement in stock derivatives contracts, and whether physical settlement should be done in a phased manner starting with stock options followed by stock futures,” the capital markets regulator said in a discussion paper.

In the past, Sebi, through various committees, and even stock exchanges, has tried implementation of physical settlement in stock derivatives. However,