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SEBI fiat to NSE on cash market prices

Our Bureau

MUMBAI, Sept. 19

THE Securities and Exchange Board of India (SEBI) has asked the National Stock Exchange (NSE) to make available the cash market closing prices before conducting the options exercise session. SEBI officials said that the markets regulator aims to plug the gap in the derivatives segment, as unavailability of cash market closing prices force the investors to take a bet at the time of exercising the options.

SEBI, at a meeting of its advisory committee on derivatives on Monday, decided to thrash out the issue in order to provide adequate information on closing prices to the members before exercising options.

Some derivatives experts said that the anomaly could be resolved by conducting the options exercise session after the cash market prices are computed and declared as is the case with the Bombay Stock Exchange (BSE). Some others suggest that settlement of options through actual delivery of shares, unlike in the American style of stock options, would redress the problem. ``This will improve the volumes in derivatives segment as well,'' dealers said.

SEBI responded to the number of representations received from the derivatives traders. Leading derivatives brokers have been agitated at the NSE's inability to provide the cash market closing prices before the options exercise session. Brokers said that due to delay in availability of closing prices, at times, they come to know only on the next day whether the options, exercised by them, have been assigned by the exchange or not.

NSE computes and gives out cash market closing prices, which determine the exercise price, only at 5.15 p.m. while the exercise time for options expires at 4.00 p.m. At BSE, cash market closing prices is available between 3.40 p.m. and 3.55 p.m. and opti ons exercise session is held between 4.00 p.m. and 4.30 p.m. after the closing prices at BSE are available.

Brokers said that transparency about closing prices helps investors in taking an informed decision. In the absence of closing prices, investors have to depend on the last traded price before exercising the options. The confusion arises as many a time the re is a difference between the last traded price and closing price of a particular stock. The difference arises due to last minute price changes in either upward or downward direction, dealers said.