Mumbai, Sept. 17 -- The Securities and Exchange Board of India's (SEBI) proposed changes to the settlement of futures and options (F&O) contracts could address a key concern over the reliance on the Closing Auction Session (CAS) to determine expiry prices, but deeper cash-market participation will be needed to make the auction mechanism more robust, according to a report by Kotak Institutional Equities.

SEBI has proposed changes to the way settlement prices of expiring index and stock derivatives are calculated. At present, the settlement price is linked to CAS, a short auction held towards the end of the trading session to determine closing prices.

Kotak said the proposed revision could reduce the dependence of derivatives settlement o...