Sebi's New Stock Market Rules From December: 10-Minute Closing Auction, Changes to F&O Settlement & More

The Securities and Exchange Board of India (Sebi) has introduced significant changes to the way Indian stock markets determine closing prices and calculate settlement values for expiring derivatives contracts. The revised framework introduces a 10-minute closing auction session in the equity cash market from December 7, 2026, alongside a new methodology for calculating settlement prices for index and stock derivatives.

Sebi Changes Stock Market Closing Rules From December; Check What's Updating

The changes will affect how orders are handled near the end of the trading day, how closing prices are discovered and how traders' expiring futures and options (F&O) positions are settled. Stock exchanges, brokers and clearing corporations will also need to adapt their systems to the revised timelines and procedures.

Sebi's New Closing Auction Session: What Changes From December 7?

Under the new rules, the closing auction in the equity cash market will take place between 3.30 pm and 3.40 pm on every trading day. This replaces the existing closing-price determination process with a defined auction mechanism in which eligible buy and sell orders can interact to establish the closing price.

The 10-minute window will have different stages, each with a specific purpose. From 3.30 pm to 3.31 pm, exchanges will calculate the reference price and transfer eligible pending orders from the regular continuous trading session into the auction.

Between 3.31 pm and 3.36 pm, market participants will be able to enter both limit orders and market orders. Limit orders specify the price at which a trader is willing to buy or sell, while market orders seek execution at the prevailing price available through the mechanism.

The next phase will run from 3.36 pm until the order-entry window closes. During this period, only limit orders will be permitted. Market orders cannot be modified or cancelled in this final phase, placing tighter restrictions on last-minute changes as the auction approaches its conclusion.

The closing time for order entry will not be disclosed as a fixed second in advance. Instead, the window will close randomly between 3.38 pm and 3.40 pm. Such a mechanism is intended to reduce incentives for participants to time their orders around a precisely known cutoff and potentially manipulate the closing-price discovery process.

Once the auction concludes, the discovered closing price will serve as the reference for the relevant closing-price functions.

Post-Close Trading Window: What Can Investors Do?

The revised framework also provides for a post-close trading session in the equity cash market from 3.50 pm to 4 pm. Transactions during this period will take place at the determined closing price of the respective securities.

Sebi Revises F&O Expiry Settlement Price Calculation

Alongside the changes to the cash-market close, Sebi has revised how settlement prices will be calculated for index and stock derivatives contracts expiring on a particular trading day.

For expiring index derivatives, the settlement price will be determined using the value of the underlying index calculated from the volume-weighted average prices (VWAPs) of its constituent stocks during the final 30 minutes of the continuous cash market session.

For expiring stock derivatives, the settlement price will be based on the VWAP of the underlying stock during the final 30 minutes of the cash market session across all stock exchanges. Clearing corporations will calculate the settlement value using the relevant data, while exchanges will supply the necessary traded quantities and VWAP information.

Sebi has also directed exchanges to disseminate indicative settlement values continuously during this 30-minute period.

The change matters particularly on expiry days, when relatively small movements in the underlying asset can affect the final settlement value of futures and options positions. Instead of relying on a single end-point price, the revised methodology uses price and volume information gathered across the closing half-hour.

However, the indicative values circulated during the period should not be confused with the final settlement price, which will be determined under the prescribed methodology.

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