Closing Auction Session rules revised as Sebi sets new timings and VWAP settlement

Sebi has updated rules for the Closing Auction Session (CAS), altering trading hours and how settlement prices are set for expiring stock and index derivatives. The regulator said the changes follow a review process and aim to improve transparency, strengthen price discovery, and keep the market close more orderly.

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Under the revised timings, the 10-minute CAS will run from 3:30 pm to 3:40 pm on all trading days. Trading in index and stock derivatives will continue until 3:45 pm. Sebi also noted there are certain exceptions for expiring index derivatives contracts.

Closing Auction Session CAS timings and order process

Sebi said the new CAS sequence will start at 3:30 pm with reference price calculation. It will also include the shifting of orders from the continuous session. Order entry for both limit and market orders will be allowed from 3:31 pm to 3:36 pm. After that, only limit orders can be entered.

The closing auction will end at a random time between 3:38 pm and 3:40 pm. In the cash segment, the post-close session will run from 3:50 pm to 4 pm. Trades in that window will take place at the closing prices of the securities.

Closing Auction Session CAS reference price and permitted orders

For the CAS reference price, Sebi said it will use the Volume Weighted Average Price of trades. The VWAP will be taken from the last 15 minutes of the continuous trading session. If there is no trade then, the last traded price of the day will apply.

If there is no trade in a security during the full day, Sebi said the reference price will be used. It will be the previous trading day’s closing price. This price will be adjusted for corporate actions, wherever applicable. Sebi also set out what order types are allowed during CAS.

Closing Auction Session CAS and expiry settlement price methodology

Sebi has changed how settlement prices will be computed for expiring derivatives contracts. The regulator said expiry settlement will now use a VWAP method. It will be based on the last 30 minutes of continuous trading, rather than relying on the CAS-based closing price.

For index derivatives, the expiry-day settlement will track the underlying index value. That index value will be calculated using the VWAP of constituent shares. The VWAP will cover the last 30 minutes of the equity cash segment’s continuous trading session.

For stock derivatives, Sebi said the settlement price for expiring contracts will use VWAP. It will be the VWAP of the underlying stock over the last 30 minutes. The calculation will include trades across all stock exchanges during the continuous trading session.

To support transparency, stock exchanges will publish data during the relevant period. They will compute and disseminate indicative underlying index values in real time. They will also publish indicative VWAPs of the underlying securities during that same window.

Closing Auction Session CAS implementation dates and price band rules

Sebi said most changes will start from December 7. However, the rules for moving unexecuted limit and iceberg orders from continuous trading into CAS will start later. Those provisions will take effect from February 8, 2027.

The regulator also tightened rules for stock futures price limits late in the day. Sebi said stock futures price bands between 3:30 pm and 3:45 pm will match those in the closing auction session. The existing system for dynamic flexing of price bands will not apply then.

Sebi said it introduced the CAS framework in the equity cash segment from August 3. The system was used to set the closing price of securities. Under the earlier setup, that CAS closing price was also used to set settlement prices for derivatives on expiry.

Sebi reviewed the earlier approach after concerns were raised about using CAS for expiry settlement. The regulator proposed changes in September and issued a consultation paper for public feedback. The final revisions also reflect input from Sebi’s Secondary Market Advisory Committee and talks with exchanges.

With inputs from PTI