New Delhi, Markets regulator Sebi on Thursday revised the framework for the Closing Auction Session (CAS), changing trading timings, and the methodology for determining settlement prices of stock and index derivatives contracts.
Under the revised framework, the 10-minute closing auction session will operate from 3:30 pm to 3:40 pm on all trading days, while trading in index and stock derivatives will continue until 3:45 pm, with certain exceptions for expiring index derivatives contracts, Sebi said in its circular.
Further, a key change pertains to the settlement of expiring derivatives contracts, which will now be based on a Volume Weighted Average Price (VWAP) methodology using the last 30 minutes of continuous trading.
The revisions follow a review of the existing framework, consideration of public comments, recommendations of Sebi’s Secondary Market Advisory Committee and discussions with stock exchanges.
The changes are aimed at improving transparency and price discovery while ensuring a more orderly closing process.
The modifications, except those relating to the transition of unexecuted limit and iceberg orders from the continuous trading session to the closing auction session, will come into effect from December 7. The provisions governing the transition of such orders will be implemented from February 8, 2027.
Sebi had introduced the CAS framework in the equity cash segment from August 3 to determine the closing price of securities. Under the existing framework, the closing price determined through CAS also serves as the basis for calculating settlement prices of derivative contracts on expiry.
Following concerns over this methodology, Sebi proposed changes in September and issued a consultation paper seeking public comments.
Under the revised schedule, the closing auction session will begin at 3:30 pm with reference price calculation and the transition of orders from the continuous trading session.
Order entry for both limit and market orders will be allowed from 3:31 pm to 3:36 pm, followed by a period during which only limit orders can be placed. The session will close randomly between 3:38 pm and 3:40 pm.
The post-close session in the cash segment will run from 3:50 pm to 4 pm, with trades executed at the closing prices of securities.
For determining the reference price used in CAS, Sebi said the price of a security in the cash segment will be based on the VWAP of trades executed during the last 15 minutes of the continuous trading session.
If no trade takes place during this period, the last traded price of the day will be used. In the absence of any trade during the day, the previous trading day’s closing price will serve as the reference price, adjusted for corporate actions wherever applicable.
The regulator has also specified the types of orders permitted during CAS.
Also, Sebi has revised the methodology for determining settlement prices of expiring derivatives contracts.
For index derivatives, the settlement price on expiry day will be based on the value of the underlying index calculated using the VWAP of constituent securities during the last 30 minutes of the continuous trading session in the equity cash segment.
For stock derivatives, the settlement price of expiring contracts will be determined using the VWAP of the underlying stock during the last 30 minutes of the continuous trading session across all stock exchanges.
Stock exchanges will compute and disseminate indicative values of the underlying index and indicative VWAPs of underlying securities in real time during the relevant period to facilitate transparency.
The regulator has also specified that stock futures’ price bands between 3:30 pm and 3:45 pm will align with those applicable during the closing auction session.
The existing framework for dynamic flexing of price bands will not apply to stock futures during this period.
