SEBI Proposes Changes To Closing Auction Session For Derivatives Expiry Days

The market regulator has proposed two options for settling derivatives contracts on expiry days. Both options use volume-weighted average prices (VWAP), but the calculation would be different under each method. 

SEBI has also suggested changes to how the indicative index value is shown during the auction and how orders can be placed or changed during CAS. 

Two Options for Expiry Settlement 

Under the first option, the expiry settlement price would use a blended VWAP. It would combine the VWAP from the final 30 minutes of continuous trading with the VWAP from the 10-minute closing auction session. 

The second option would use only the VWAP from the last 30 minutes of continuous trading as an interim measure. The proposed framework would cover both index and stock derivatives. 

Changes to Market Timings 

SEBI has given two possible timing structures for CAS stocks. 

Under the first, continuous trading would run until 3:30 pm. The auction would then take place from 3:31 pm to 3:40 pm, while derivatives trading would continue until 3:45 pm. 

The second option would keep the existing 3:15 pm cut-off for CAS stocks. The auction would end by 3:25 pm, followed by derivatives trading until 3:30 pm. 

SEBI has also proposed cutting the gap between continuous trading and CAS from five minutes to around one minute. The post-CAS derivatives trading period would also be reduced from 10 minutes to five minutes. 

Changes to Indicative Prices and Orders 

SEBI has proposed stopping the publication of the indicative index value (IIV) during CAS. However, indicative equilibrium prices for individual securities would continue to be shown. 

The regulator said the IIV may be mistaken for the actual index level even though it does not represent completed trades. This could affect trading decisions. 

SEBI has proposed keeping the existing 3% price band during CAS. Orders placed more than 1% away from the reference price would not be allowed to be cancelled during the auction. They could only be changed in a way that improves the price. 

Pending iceberg-order quantities at the end of continuous trading may also be converted into normal limit orders, with the full quantity shown in the CAS order book. 

CAS Introduced in August 

SEBI introduced CAS for stocks in the derivatives segment from August 3, 2026. 

The regulator is now seeking public comments on the proposed changes. The deadline for submitting comments is October 3, 2026. 

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Conclusion 

SEBI has proposed changes to the closing auction session covering expiry settlement prices, market timings, order rules and the publication of indicative prices. The regulator has given two options for expiry settlement and is seeking public comments until October 3, 2026. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.