Ministry : Ministry of Finance (SEBI)

Introduction of Closing Auction Session _CAS_ in the Equity Cash Segment and

Subject : ministry of finance

Introduction of Closing Auction Session (CAS) in the Equity Cash Segment and Certain Modifications in the Pre-Open Auction Session

This SEBI circular marks a significant structural reform in India’s equity market by replacing the volume-weighted average price (VWAP) mechanism for determining closing prices with a Closing Auction Session (CAS), aligning India with global market practices. The move enhances price discovery, transparency, and fairness, particularly for derivatives settlement, index calculation, and mutual fund valuations.

Key Points

• SEBI will introduce a 20-minute Closing Auction Session (CAS) from 3:15 PM to 3:35 PM, initially for stocks with derivative contracts, starting August 3, 2026, with the closing price determined via an equilibrium price mechanism instead of VWAP.
• The CAS will operate in four phases: reference price calculation (3:15–3:20 PM), market and limit order entry (3:20–3:25 PM), limit-only orders with random closure between 3:28–3:30 PM, and order matching (3:30–3:35 PM).
• The reference price for CAS will be the VWAP of trades between 3:00 PM and 3:15 PM; if no trades occur, fallbacks include the day’s last traded price or the previous day’s adjusted closing price, especially post-corporate actions.
• A ±3% price band will apply during CAS, and stock futures' price bands will be aligned with CAS during 3:15–3:40 PM, suspending dynamic flexing; Stock Exchanges must jointly develop SOPs for this alignment within 30 days.
• The Pre-Open Auction Session will be revised to mirror CAS logic—running from 9:00 AM to 9:15 AM with random closure between 9:08–9:10 AM—and will implement the same order priorities and dissemination standards, effective September 7, 2026.
• Unexecuted limit orders from the Continuous Trading Session (CTS) will carry forward to CAS (subject to price band and order type), with higher time priority than new CAS orders, but modified carried-forward orders will lose priority and require margin.

Modernizing Market Closing: A Shift to Transparent, Global Standards

SEBI’s decision to replace the longstanding VWAP-based closing price with a centralized auction system represents a transformative step toward fairer, more transparent price discovery at market close. By adopting a globally recognized CAS model, India strengthens its market integrity, supports passive fund strategies, and aligns derivatives settlement with accurate, consensus-driven prices. The phased rollout—including system upgrades, SOP development, and surveillance enhancements—ensures a smooth transition, while parallel updates to the pre-open session create symmetry in opening and closing mechanisms. This reform signals SEBI’s continued commitment to modernizing market infrastructure in response to evolving investor needs and international best practices.