As of now only cash settlement is allowed by stock exchanges. With Sebi’s new guidelines, bourses can now opt for physical settlement in F&O.
Under physical settlement, the derivatives contract has to be settled with the delivery of underlying shares, while in cash settlement change in the price of a contract has to be paid.
Sebi also gave the freedom to stock exchanges to introduce physical settlement in a phased manner. But the exercise has to be completed for all stock options and futures within six months of introduction.
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