SEBI changes closing auction rules after trader pushback
What's the story
The Securities and Exchange Board of India (SEBI) has issued a final framework for the Closing Auction Session (CAS). The regulator will continue with the 30-minute volume-weighted average price (VWAP) for derivatives expiry settlement while moving the closing auction to a new 3:30-3:40pm window. This follows concerns about sharp price swings under the current auction-linked settlement approach.
Timeline
Changes will be implemented from December 7, 2026
Under the revised framework, the CAS will run from 3:30pm to 3:40pm on all trading days.
The changes will be implemented from December 7, 2026, except for provisions governing the transition of unexecuted limit and iceberg orders from the continuous trading session, which will come into effect on February 8, 2027.
Currently, CAS operates between 3:15pm and 3:35pm.
Session details
Key features of the new CAS framework
The CAS session will start with a one-minute reference-price calculation and transition period from 3:30pm to 3:31pm.
Both limit and market orders will be allowed from 3:31pm to 3:36pm. After that, only limit orders will be accepted while market orders can't be modified or canceled.
The session will close randomly between 3:38pm and 3:40pm, followed by order matching.
Trading hours
Changes in trading hours for derivatives and cash market
According to the circular, trading in index derivatives will continue until 3:45pm on normal trading days. However, expiring index derivatives contracts will stop trading at 3:30pm on expiry days.
Stock derivatives will trade until 3:45pm even on expiry days.
The cash market's post-close session will run from 3:50pm to 4:00pm with trades executed at closing prices.
Price calculation
How will the reference price be calculated?
Stock exchanges will calculate and disseminate the indicative value of the underlying index in real time during the last 30 minutes of continuous trading session. This will be based on VWAPs of its constituent securities.
The CAS reference price will be based on VWAP of trades during last 15 minutes of continuous trading session, with certain conditions for non-trading periods.
Rule changes
Other important provisions included in the circular
The price bands for stock futures between 3:30pm and 3:45pm will be aligned with CAS price bands, without dynamic flexing during that period.
CAS orders will generally be subject to applicable margin requirements, with exceptions for eligible orders carried forward from the continuous session.
Unexecuted limit orders will generally carry forward to the CAS, except stop-loss orders and those outside applicable price bands.
Market response
Market participants welcome SEBI's decision
The move has been widely welcomed by market participants.
Uttam Bagri, Managing Director at BCB Brokerage Private Limited, said "SEBI's decision to delink equity derivatives settlement from CAS-based price discovery removes a major irritant for market participants and is a welcome step toward smoother market functioning."
He also welcomed the restoration of cash segment trading hours to 3:30pm as it was earlier.