The Securities and Exchange Board of India (SEBI) has revised the framework for the Closing Auction Session (CAS) and changed the settlement price methodology for stock and index derivatives contracts. These changes aim to improve transparency, price discovery, and ensure a smoother market closing process.
- The CAS will operate from 3:30 pm to 3:40 pm on all trading days.
- Trading in index and stock derivatives will continue until 3:45 pm, with some exceptions for expiring contracts.
- Settlement prices for expiring derivatives will be based on the Volume Weighted Average Price (VWAP) of the last 30 minutes of continuous trading.
- Order types and timings during CAS have been updated for better order management.
- Changes will take effect from December 7, 2026, except for order transition rules effective February 8, 2027.
What is the new schedule for the Closing Auction Session?
Under the revised framework, the Closing Auction Session will start at 3:30 pm and end at 3:40 pm every trading day. This session begins with the calculation of a reference price and the transition of orders from the continuous trading session. Trading in index and stock derivatives will continue until 3:45 pm, except for some expiring index derivatives contracts.
How will orders be managed during the Closing Auction Session?
Order entry for both limit and market orders is allowed from 3:31 pm to 3:36 pm. After that, only limit orders can be placed until the session closes randomly between 3:38 pm and 3:40 pm. This structure helps manage the order flow effectively during the auction.
How is the reference price for CAS determined?
The reference price for securities during CAS is based on the Volume Weighted Average Price (VWAP) of trades executed in the last 15 minutes of the continuous trading session. If no trades occur during this period, the last traded price of the day is used. If there are no trades throughout the day, the previous trading day's closing price, adjusted for corporate actions, becomes the reference price.
What changes have been made to derivatives settlement prices?
SEBI has revised the method for determining settlement prices of expiring derivatives contracts. For index derivatives, the settlement price on expiry day will be the VWAP of the underlying index's constituent securities during the last 30 minutes of continuous trading. For stock derivatives, the settlement price will be the VWAP of the underlying stock across all stock exchanges during the same period.
How will stock exchanges support these changes?
Stock exchanges will compute and share indicative values of the underlying index and VWAPs of underlying securities in real time during the relevant period. This measure aims to increase transparency and help market participants make informed decisions.
Are there any changes to price bands during the closing period?
Yes, the price bands for stock futures between 3:30 pm and 3:45 pm will align with those applicable during the Closing Auction Session. The existing dynamic flexing of price bands will not apply to stock futures during this time.
When will these changes take effect?
Most of the revised framework will come into effect on December 7, 2026. However, the provisions related to the transition of unexecuted limit and iceberg orders from continuous trading to the Closing Auction Session will be implemented later, starting February 8, 2027.
These updates follow SEBI's review of the existing CAS framework, public feedback, and recommendations from its Secondary Market Advisory Committee. The regulator introduced the CAS framework in the equity cash segment on August 3, 2026, to determine closing prices more effectively. The recent changes address concerns about the previous settlement price methodology and aim to enhance market efficiency.
