New CAS From December: SEBI Revamps Closing Auction Session and Derivative Settlement Framework: Key Changes Explained

MUMBAI — In a major regulatory update aimed at deepening market transparency and streamlining market close operations, the Securities and Exchange Board of India (SEBI) has issued a comprehensive circular modifying key aspects of the Closing Auction Session (CAS), market timings, and derivative settlement methodologies.

The revised framework follows a detailed public consultation paper released on September 12, 2026, and incorporates recommendations from SEBI’s Secondary Market Advisory Committee (SMAC), alongside direct feedback from stock exchanges and clearing corporations.

Key Highlights of the SEBI Circular


1. Restructured Timings for the Closing Auction Session (CAS)

SEBI has streamlined the CAS into a precise 10-minute window from 3:30 p.m. to 3:40 p.m. on all trading days. The session is systematically segmented to ensure smooth price discovery:

• 3:30 p.m. – 3:31 p.m. (1 min): Reference price calculation and transition from the Continuous Trading Session (CTS) to CAS.

• 3:31 p.m. – 3:36 p.m. (5 mins): Order entry period open for both limit and market orders.

• 3:36 p.m. – 3:40 p.m. (4 mins): Order entry restricted to limit orders only, with no modifications or cancellations allowed for market orders.

• Random Closure: To prevent manipulation, the order entry session closes randomly between 3:38 p.m. and 3:40 p.m. via a system-driven trigger.

2. Clearer Differentiation for Derivative Trading Timings

The circular provides distinct operational schedules for index and stock derivatives post-cash-market close:

• Index Derivatives: Trading will continue until 3:45 p.m. on normal trading days; however, on expiry days, trading in expiring index derivatives will cease sharply at 3:30 p.m.

• Stock Derivatives: Trading will continue until 3:45 p.m. on all trading days, including expiry days.

3. Refined Reference Pricing and Order Rules

• Reference Price: The base reference price for CAS in the cash segment will be derived from the Volume Weighted Average Price (VWAP) computed during the last 15 minutes of the Continuous Trading Session (CTS).

• Order Restrictions: Only limit and market orders factor into equilibrium price calculation during CAS. New iceberg orders and stop-loss orders are strictly prohibited during this window.

• Transition of Unexecuted Orders: Unexecuted limit and qualifying iceberg orders from the CTS will carry forward into CAS, though transitioned iceberg orders will carry a lower time priority than standard limit orders.

4. Revised Derivative Settlement Methodology on Expiry Days

To minimise settlement volatility, SEBI has modified how settlement prices are calculated on expiry days:

• Index Derivatives: Settlement prices will be determined using the value of the underlying index calculated from the VWAP of constituent securities during the last 30 minutes of CTS in the equity cash segment. Exchanges will compute and broadcast indicative values in real-time.

• Stock Derivatives: Settlement prices will be based on the VWAP of the underlying stock during the last 30 minutes of CTS across all exchanges.

Implementation Timeline

Market infrastructure institutions have been instructed to make necessary operational and system adjustments:

• Within 7 Days: Stock exchanges and clearing corporations must jointly update their Standard Operating Procedures (SOPs) in consultation with SEBI.

• December 7, 2026: Most modifications—including updated CAS timings, derivative settlement formulas, and general operational rules—will formally come into effect.

• February 8, 2027: Provisions specifically governing the transition and handling of unexecuted iceberg orders from CTS to CAS will go live.

This overhaul is expected to provide market participants with enhanced clarity, tighter execution controls, and a more orderly transition between continuous trading and market close.