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Rajesh Baheti of Crosseas Capital Services and Venkatachalam Shunmugam of MCQube share their views on SEBI's CAS reforms, F&O settlement, VWAP and the need to improve market liquidity. By Yash Jain September 12, 2026, 4:54:42 PM IST (Published) Rajesh Baheti, MD of Crosseas Capital Services, has backed a return to the earlier volume-weighted average price (VWAP) method for settling F&O contracts, while Venkatachalam Shunmugam, Partner at MCQube, has called for stronger measures to improve liquidity in the cash market before the Closing Auction Session (CAS) is fully adopted. The two market experts discussed the way forward for CAS following the Securities and Exchange Board of India's (SEBI) consultation paper on changes to the mechanism.
The proposed framework offers two options for F&O settlement: a blended VWAP based on continuous trading and the CAS window, or a return to the earlier VWAP-based method. Baheti said the regulator's proposals address several concerns raised by market participants over the past month. He favoured using the earlier VWAP-based settlement method for a year, allowing the market to assess whether CAS can develop enough liquidity and deliver a reliable closing price.
“Why fix something that was not broken?” Baheti said, questioning the need to change the F&O settlement process when the main concerns emerged around the new CAS mechanism. He said the F&O segment should not immediately depend on CAS prices for settlement. A return to the earlier method would give the market time to assess CAS performance before considering a move to blended VWAP.
Baheti also said that the proposed changes to market timings were less important than ensuring an effective settlement mechanism. In his view, the transition to a blended system should happen only when CAS becomes stable and representative of market conditions. Shunmugam took a different approach, arguing that the consultation paper primarily addresses concerns around derivative settlement rather than the underlying liquidity problem in the CAS.
He said the regulator would need to take further steps to bring more buyers and sellers into the market. One of his key suggestions was to strengthen the Securities Lending and Borrowing Mechanism (SLBM), including by reviewing its economics and improving participation. He also proposed introducing an imbalance-only order type, similar to one used in international markets.
Such an order would allow participants to help balance buy and sell volumes without directly influencing prices. According to Shunmugam, this could make the CAS process more resilient. Another concern was the proposed decision not to disclose the indicative index value during the auction session.
He said this could create an information gap between retail investors and sophisticated market participants who may be able to calculate the index value using available data. While Baheti preferred a one-year period before considering a blended settlement method, Shunmugam suggested a shorter transition period. He proposed using continuous-session VWAP for six months while liquidity is built up, followed by a possible move to blended VWAP.
For the entire discussion, watch the accompanying video Home Market News SEBI’s CAS proposals: Crosseas Capital backs earlier F&O settlement, MCQube seeks better liquidity
Source: CNBC TV18
