SEBI Proposes Overhaul of Closing Auction Session: Shifting Away from August 2026 Framework Across Derivatives, Timings, and Order Rules
Summarized by AI; it may make mistakes. Check important info
Summarized by AI; it may make mistakes. Check important info
The Securities and Exchange Board of India (SEBI) has released a comprehensive consultation paper proposing major structural adjustments that depart significantly from the Closing Auction Session (CAS) framework currently in effect since August 3, 2026. The new proposals introduce key operational shifts across derivatives pricing, market timings, live broadcasting, order cancellations, and iceberg orders.
Derivatives Settlement Price Calculation
Moving away from the current system where expiry-day settlement prices rely exclusively on CAS closing prices, SEBI has outlined two alternative options. Option 1 introduces a Blended Volume Weighted Average Price (VWAP) combining trades from the final 30 minutes of the Continuous Trading Session (CTS) and 10 minutes of CAS based on actual traded value proportions. Option 2 temporarily reverts to the pre-August 2026 CTS VWAP method for at least one year before transitioning to the blended model.
Dissemination of Indicative Index Values
Diverging from the current live broadcasting of IEP-derived Indicative Index Values during CAS, SEBI proposes halting this broadcast to prevent market participants from confusing unexecuted indicative levels with actual traded index prints, though individual security-level IEPs will still be shown.
Market Timings and Transition Windows
Both proposed scheduling blueprints (Option A and Option B) shift away from current timelines by cutting the transition window down to just 1 minute and reducing the post-CAS derivatives trading window from 10 minutes to 5 minutes.
- Option A extends CTS for CAS stocks to 3.30 pm, running CAS from 3.31 to 3.40 pm, with derivatives closing at 3.45 pm.
- Option B maintains the current 3.15 pm cut-off for CTS on CAS stocks, holding CAS from 3.15 to 3.25 pm, with derivatives concluding at 3.30 pm.
Order Cancellation Restrictions
Moving past the current rule allowing free cancellation of any limit orders within the $\pm3\%$ price band, SEBI proposes restricting the cancellation of limit orders placed or modified beyond $\pm1\%$ up to $\pm3\%$ of the Reference Price. Price-improving modifications will still be allowed, and orders within $\pm1\%$ remain fully cancellable.
Handling of Unexecuted Iceberg Orders
Diverging from the current practice where unexecuted Iceberg orders from CTS are excluded from the auction, SEBI proposes converting these remaining unexecuted pending quantities into normal, fully disclosed limit orders that participate directly in the CAS order book.
Feedback and Submission Details
Market participants, institutional investors, and members of the public wishing to submit their views, comments, and suggestions on these proposed structural shifts can do so directly through the SEBI official website.
The deadline for submitting feedback is October 3, 2026.
