SEBI revamps Closing Auction Session rules and derivative settlement price mechanism

Key facts

• The Securities and Exchange Board of India (SEBI) announced a comprehensive overhaul of the Closing Auction Session (CAS) framework in the equity cash segment along with revised settlement procedures for derivatives contracts.
• The primary modifications take effect on December 7, 2026, while provisions on unexecuted order transitions take effect on February 8, 2027.
• CAS will be a dedicated 10-minute session from 3:30 p.m. to 3:40 p.m. on all trading days, with the order entry session closing randomly between 3:38 p.m. and 3:40 p.m. through a system-driven mechanism.
• The CAS reference price will be based on the volume-weighted average price (VWAP) of trades in the final 15 minutes of the Continuous Trading Session (CTS), falling back to the day's last traded price or previous closing price if no trades occur.
• On expiry day, the settlement price of expiring index derivatives will be based on the underlying index value using VWAP of constituent securities during the last 30 minutes of CTS, while stock derivative settlement prices will be set by Clearing Corporations using stock VWAP across all stock exchanges.
• Trading in index derivatives continues until 3:45 p.m. on regular days but ceases at 3:30 p.m. for expiring contracts on expiry days, while stock derivatives trade until 3:45 p.m. on all sessions.
• Unexecuted limit and eligible iceberg orders from CTS carry forward into CAS, with iceberg orders transitioning as fully disclosed limit orders.