SEBI Proposes New Closing Auction Session to Make Stock Prices More Stable

The Securities and Exchange Board of India (SEBI) has suggested a new method to calculate the closing price of stocks. This method is called the Closing Auction Session (CAS). 

It is already used by many big stock exchanges around the world and is believed to provide a more stable and less volatile closing price compared to the current system used in India, called the Volume Weighted Average Price (VWAP).

Why Does SEBI Want to Introduce CAS?

India is currently the only major market that uses VWAP to find the closing price of stocks. SEBI wants to change this to align with global practices. Major exchanges like the New York Stock Exchange (NYSE), London Stock Exchange (LSE), and others use CAS for closing prices.

Besides following global trends, CAS is expected to support the growth of passive investing. Passive investment funds, like mutual funds and foreign portfolio investors, have been growing fast in India. These investors prefer stable closing prices to reduce errors when matching their investments to global indices like FTSE and MSCI, where Indian stocks have a big presence.

CAS also offers a more transparent way for big investors to trade. Right now, large trades happen mostly through block deals, which are private and sometimes not close to the current market price. CAS gathers all buy and sell orders openly and decides a fair closing price, giving investors more confidence and reducing the risk of leaks about big trades.

How CAS Will Work in India?

Initially, SEBI plans to start CAS only on stocks in the derivative segment instead of just the top stocks like Nifty 50 or Sensex, as it was earlier suggested. This change is to avoid confusion and extra work for passive funds that track many other stocks.

The new CAS session will run for 20 minutes from 3:15 PM to 3:35 PM, divided into four phases. This timing is chosen to ensure smooth trade processing and avoid problems with calculating mutual fund values or settlement deadlines.

Trades during CAS will be allowed within a smaller price range of 3% above or below a reference price, which will now be based on the VWAP from 3:00 PM to 3:15 PM. Also, market orders will be given priority over limit orders to make sure more trades can happen during this session.

Read more: TCS, HDFC Bank, Airtel, and Infosys Among World’s Most Valuable Brands: Kantar.

Conclusion

SEBI’s plan to introduce the Closing Auction Session is a positive step towards modernising India’s stock market. It aligns India with global standards, helps large investors trade more transparently, and supports the growing passive investment sector. The regulator has invited public feedback on this proposal until September 12, 2025, before finalising the rules. If implemented well, CAS could make the Indian stock market more efficient and stable for everyone. 

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.