How SEBI's proposed changes to CAS will affect stock market
What's the story
The Securities and Exchange Board of India (SEBI) has proposed a set of changes to the Closing Auction Session (CAS). The proposed amendments cover derivatives contract settlements, market timings, and operational aspects of the auction process. The regulator has sought public comments on seven proposals in its consultation paper. Responses are due by October 3, 2026.
Settlement strategies
Settlement price determination on expiry days
SEBI has proposed two methods for determining the settlement price of index and single-stock derivatives on expiry days.
The first is a "Blended VWAP" method, which would use trades during the last 30 minutes of Continuous Trading Session (CTS) and 10-minute CAS period.
The second option is to continue with the existing CTS VWAP method as an interim arrangement, based only on trades during the last 30 minutes of CTS.
IIV display
Indicative index value display during CAS
SEBI has also proposed to stop displaying the Indicative Index Value (IIV), derived from Indicative Equilibrium Prices (IEPs), during CAS. However, it will continue to provide security-level IEPs.
The regulator noted that IEPs are indicative and evolving values, not actual trade prices.
Some stakeholders have misinterpreted the IIV, leading them to take positions based on this indicative value.
Timing adjustments
Proposed changes to market timings
SEBI has proposed two options for market timings.
The first option suggests continuous trading in CAS stocks until 3:30pm followed by a transition period of about one minute.
The second option proposes continuous trading in CAS stocks until 3:15pm, with CAS from 3:15pm to 3:25pm and derivatives trading ending at 3:30pm.
Both options propose reducing the transition time between CTS and CAS from five minutes to up to one minute.
Cancellation rules
Other key proposals for CAS
SEBI has also proposed restricting the cancellation of limit orders placed beyond +-1% of reference price during CAS.
However, price-improving modifications would still be allowed within the existing +-3% price band.
Another proposal seeks to allow unexecuted Iceberg orders at the end of CTS to be converted into normal limit orders, with their entire pending quantity disclosed in the CAS order book.