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The Securities and Exchange Board of India (SEBI) has proposed changes to the closing auction session (CAS), including two methodologies to determine the settlement price for derivatives on expiry days, shortening the transition period during the auction and removing the indicative index value.
The regulator has proposed settling prices for index and single-stock derivatives on expiry days either though a blended volume-weighted average price (VWAP) method using trades in the last 30 minutes of continuous trading and 10 minutes of CAS, or temporarily going back to the existing VWAP-based methodology for at least a year.
There are two alternatives for market timings as well. One option allows continuous trading in CAS stocks until 3:30 pm, followed by the auction, with derivatives trading continuing until 3:45 pm. Orelse, the existing 3:15 pm cut-off for continuous trading in CAS stocks will be retained, while derivatives trading will end at 3:30 pm.
In both cases, there will be a cut in the transition period between continuous trading and CAS to a minute from five minutes, and the post-CAS derivatives window from 10 minutes to five minutes.
SEBI has also proposed that exchanges stop disseminating the indicative index value during CAS to avoid misinterpretation of such index values as an actual traded value, while continuing to provide indicative equilibrium prices for individual stocks.
It has suggested restricting cancellation of orders placed more than 1 per cent away from the reference price, while allowing price-improving modifications. Unexecuted Iceberg orders at the start of CAS could also be converted into normal limit orders with full disclosure. SEBI has invited public comments on the proposals until October 3.
The tweaks come over a month after the introduction of CAS on August 3, which moved away from VWAP method to an auction where buy and sell orders are matched to arrive at an equilibrium price. However, the auction has since seen sharp price spikes and excess volatility on expiry days due to lower liquidity.
SEBI’s data shows that derivatives activity remains high around the closing period. In the five expiries studied after CAS was introduced, average premium turnover per minute in the 10-minute auction was ₹189.82 crore on NSE and ₹288.94 crore on BSE. This compared with ₹126.31 crore and ₹141.48 crore, respectively, during the comparable 30-minute period before CAS.
In the bended VWAP method, the share of each period would depend on the actual traded value, rather than a fixed weight. For example, if 90 per cent of the total traded value came from continuous trading and 10 per cent from CAS, the CAS would contribute 10 per cent to the blended price.
Published on September 12, 2026
