SEBI · Market Regulation · 15 October 2026
Closing Auction Session Finalised: 10-Minute Session, 30-Minute VWAP Expiry Settlement
Circular No. HO/47/11/11(3)2025-MRD-POD2/I/23843/2026 — Market Regulation Department, SEBI
In brief: After a consultation that drew a record response, SEBI has finalised the Closing Auction Session (CAS) framework. The 10-minute auction runs 3:30–3:40 pm every trading day, and — the big change — expiring index and stock derivatives will now settle on the 30-minute VWAP of the last 30 minutes of continuous trading, not the closing-auction price. The framework takes effect 7 December 2026; the unexecuted-order transition rules kick in 8 February 2027.
What happened
SEBI introduced the Closing Auction Session in the equity cash segment through its circular dated 16 January 2026, with the aim of transparent, efficient price discovery for closing prices. That circular also laid down that settlement prices of stock and index derivatives on expiry day would be determined by the Clearing Corporations based on the closing prices arrived at under the CAS framework.
Once CAS went live, SEBI reviewed how it was functioning. On 12 September 2026, it issued a consultation paper on three things: the timings and operational aspects of CAS, the transition of unexecuted iceberg orders from the Continuous Trading Session (CTS) to CAS, and the methodology for settlement prices of derivatives. After analysing the comments received, acting on the recommendations of its Secondary Market Advisory Committee (SMAC), and holding discussions with the stock exchanges, SEBI has now modified the framework through its 15 October 2026 circular.
The modifications cover the Jan-16 circular on "Introduction of Closing Auction Session (CAS) in the Equity Cash Segment and certain modifications in the Pre-Open Auction Session" and the relevant provisions of Chapter 5 of the Master Circular for Stock Exchanges and Clearing Corporations dated 30 December 2024.
Key changes at a glance
⏱️ CAS runs 3:30–3:40 pm — a 10-minute session, every trading day
The session is broken into four phases (para 4.2.1–4.2.2):
Once order entry closes, the exchange matches orders under the CAS framework and disseminates the closing price and executed quantity as soon as practicable (para 4.2.3).
📊 Expiry-day settlement moves back to 30-minute VWAP
This is the headline change. Instead of settlement prices based on the closing-auction price (the Jan-2026 approach), on expiry day the settlement price of:
- Expiring index derivatives — based on the value of the underlying index calculated using the volume-weighted average prices (VWAP) of the constituent securities during the last 30 minutes of CTS in the equity cash segment. Exchanges must compute the indicative index value in real time during that window and disseminate it continuously (para 4.9.1).
- Expiring stock derivatives — based on the VWAP of the underlying stock during the last 30 minutes of CTS across all stock exchanges. Exchanges will give the clearing corporations the VWAP and quantity traded in the window, and disseminate the indicative VWAP continuously (para 4.9.1).
In short: expiry-day settlement will reflect half an hour of real trading rather than a 10-minute auction — addressing the concentration and manipulation risks market participants flagged during the consultation.
🧊 Unexecuted orders: what carries over from CTS to CAS
- All unexecuted limit orders at the end of CTS carry forward to CAS — except stop-loss orders and orders priced beyond the CAS price bands (para 4.8.1).
- Unexecuted iceberg orders within the CAS price bands carry forward as fully disclosed limit orders — unless the trader opted out when placing the original order (para 4.8.2).
- Carried-forward iceberg orders get lower time priority than other carried-forward limit orders (time priority among them follows the original order time), but all carried-over orders outrank orders placed fresh during CAS (para 4.8.3–4.8.4).
- Carried-over orders can be modified during CAS, but modification resets their time priority (para 4.8.5).
- No new iceberg orders may be placed during CAS itself — full quantity disclosure is mandatory; stop-loss orders are not allowed during CAS at all (para 4.5.2–4.5.3).
🕒 Derivatives timings and the post-close session
- Index derivatives: trade till 3:45 pm on all trading days — except that expiring index derivatives stop at 3:30 pm on expiry day (para 4.2.4).
- Stock derivatives: trade till 3:45 pm on all trading days, including expiry days (para 4.2.5).
- Cash post-close session: 3:50–4:00 pm, trades execute at the closing price (para 4.2.6).
- On special trading sessions, CAS keeps the same duration; the derivatives segment closes 5 minutes after CAS ends, and a 10-minute post-close session begins 5 minutes after the derivatives close (para 4.2.7).
- The price band of stock futures between 3:30 and 3:45 pm aligns with the CAS price band, and the dynamic flexing framework does not apply in that window (para 4.4.2).
🎯 Reference price: VWAP of the last 15 minutes of CTS
The CAS reference price is the VWAP of trades in the security during the last 15 minutes of CTS. Fallbacks, in order (para 4.3.2): the day's last traded price if no trade in the last 15 minutes → the previous trading day's closing price if no trade all day (with adjustment for corporate actions).
Old vs new
Who is affected
- Trading members and brokers — order-management systems must handle the fixed 3:30–3:40 CAS phases, the iceberg opt-out flag, and order-level margin checks on CAS orders (para 4.11; carried-over orders are exempt unless modified).
- Algorithmic and institutional traders — closing-price benchmarks and expiry-day strategies change: settlement now tracks a 30-minute VWAP, and indicative VWAPs will be broadcast live in the last 30 minutes of CTS.
- Derivatives traders — expiring index derivatives stop at 3:30 pm on expiry day; stock derivatives run till 3:45 pm including expiry.
- Exchanges and clearing corporations — must jointly revise their SOPs in consultation with SEBI within 7 days (by 22 October 2026), issue guidelines to market participants, amend bye-laws/rules as needed, and put systems in place for timely operationalisation (paras 5, 7, 8).
⏰ Implementation dates to note:
- 7 December 2026 — the circular's modifications (CAS timings, VWAP settlement, margins, reference price, price bands) take effect.
- 8 February 2027 — the para 4.8 rules on unexecuted limit/iceberg order transition take effect.
What to do next
- Brokers and fintechs: update order routing, margining logic and disclosure handling for the new CAS phases before 7 Dec 2026, and build the iceberg opt-out/full-disclosure transition before 8 Feb 2027.
- Watch for exchange/CC circulars and revised SOPs (due by 22 Oct 2026) — these will spell out the operational detail.
- The circular is issued under Section 11(1) of the SEBI Act, 1992, read with Regulation 51 of the SECC Regulations, 2018, and is available on sebi.gov.in at Legal → Circulars.
FAQs
1. What exactly is the Closing Auction Session?
A dedicated session after continuous trading where limit and market orders are collected and matched at a single equilibrium price to discover the official closing price of securities, instead of deriving the close from the last few minutes of continuous trading.
2. Why did SEBI drop the closing-auction-price method for expiry-day settlement?
The Jan-2026 circular had tied derivatives settlement to the CAS closing price. Market feedback during the Sept-2026 consultation raised concerns around concentrating the settlement benchmark in a short auction; the final framework reverts to a 30-minute VWAP of the last 30 minutes of continuous trading, which is harder to game and reflects deeper liquidity.
3. My unexecuted limit order is still pending at 3:30 pm. What happens to it?
It automatically carries forward into CAS — unless it is a stop-loss order or priced outside the CAS price bands. Carried-over orders actually get higher time priority than fresh orders placed during CAS.
4. I use iceberg orders. Do I have to disclose everything now?
Only when a pending iceberg order crosses into CAS: it transitions as a fully disclosed limit order (you can opt out of the transition at order placement). Within CAS itself, no new iceberg orders are allowed — every order placed during CAS must show its full quantity.
5. Till what time can I trade on expiry day?
Expiring index derivatives: till 3:30 pm. Stock derivatives: till 3:45 pm (including expiry days). Cash segment post-close: 3:50–4:00 pm at the closing price.
6. When do the changes take effect?
7 December 2026 for the CAS timings, settlement methodology, reference price, price bands and margins. 8 February 2027 for the unexecuted limit/iceberg order transition rules.
Sources
- SEBI Circular No. HO/47/11/11(3)2025-MRD-POD2/I/23843/2026 dated 15 October 2026 — "Review of certain aspects of the Closing Auction Session, market timings and settlement methodology for derivatives contracts" (official PDF, sebi.gov.in)
- SEBI circular dated 16 January 2026 — "Introduction of Closing Auction Session (CAS) in the Equity Cash Segment and certain modifications in the Pre-Open Auction Session" (referenced in the 15-Oct circular)
- SEBI Consultation Paper dated 12 September 2026 on CAS review (referenced in the 15-Oct circular)
- Master Circular for Stock Exchanges and Clearing Corporations dated 30 December 2024 (Chapter 5 provisions modified)
Disclaimer: This summary is for information and does not constitute legal advice. Refer to the official SEBI circular linked above for the full operative text.
