The Securities and Exchange Board of India (SEBI) has issued a circular announcing the introduction of a Closing Auction Session (CAS) in the equity cash segment. This new mechanism will replace the existing VWAP-based closing price system for select stocks, marking a significant shift in how closing prices are discovered in Indian stock markets.
The move is aimed at improving price discovery, transparency, and market integrity, especially for securities that serve as benchmarks for derivatives settlement, index calculation, and mutual fund NAVs.
What Is the Closing Auction Session (CAS)?
The Closing Auction Session (CAS) is a single-price auction conducted at the end of the trading day. Instead of relying on trades executed during the last 30 minutes of continuous trading, CAS aggregates all eligible buy and sell orders into one auction to determine a fair and manipulation-resistant closing price.
Globally, most major markets already use closing auctions to ensure that the final price reflects true market consensus rather than fragmented trading activity.
Applicability of CAS
SEBI will implement CAS in a phased manner:
- Initially, CAS will apply to equity cash segment stocks that have derivative contracts
- Other securities will continue to follow the VWAP-based closing price mechanism until further review
CAS Timings and Session Structure
The Closing Auction Session will run for 20 minutes from 3:15 p.m. to 3:35 p.m. on all trading days and will consist of multiple phases:
- 3:15 p.m. – 3:20 p.m.: Reference price calculation and transition from continuous trading
- 3:20 p.m. – 3:25 p.m.: Order entry for market and limit orders
- 3:25 p.m. – 3:30 p.m.: Limit-order-only phase with random closure in the final 2 minutes
- 3:30 p.m. – 3:35 p.m.: Order matching and price determination
The random close feature is system-driven and designed to prevent price manipulation near market close.
Reference Price and Price Band Rules
- The reference price for CAS will be the VWAP of trades between 3:00 p.m. and 3:15 p.m.
- If no trades occur during this window, the last traded price (LTP) or previous day’s closing price will be used
- All CAS trades must fall within a ±3% price band from the reference price
This ensures price stability while allowing efficient matching of orders.
Order Types Allowed in CAS
During the Closing Auction Session:
Allowed
- Market orders
- Limit orders
Not Allowed
- Stop-loss orders
- Iceberg orders
All orders must be fully disclosed and are considered while calculating the equilibrium price.
Unexecuted eligible limit orders from the continuous trading session will automatically carry forward into CAS and will receive higher time priority than fresh CAS orders.
How the Closing Price Is Determined
The CAS closing price is discovered using an equilibrium price mechanism:
- The price at which maximum executable volume is achieved is selected
- If multiple prices qualify, the price with the least unmatched quantity is chosen
- If ambiguity still exists, the price closest to the reference price is selected
- If no equilibrium price emerges, the reference price becomes the closing price
This structured approach enhances fairness and reduces the scope for last-minute price distortion.
Impact on Derivatives and Settlement Prices
Since the closing price is a critical input for derivatives settlement:
- SEBI has revised the settlement price calculation framework for stock and index derivatives
- Clearing Corporations will compute settlement prices using volume-weighted averages of CAS-based closing prices across exchanges
- Stock Exchanges and Clearing Corporations must jointly issue Standard Operating Procedures (SOPs) in consultation with SEBI
Changes to the Pre-Open Auction Session
SEBI has also aligned the Pre-Open Auction Session with CAS principles:
- Similar equilibrium price discovery mechanism
- Random closure in the final order entry phase
- Priority given to market orders over limit orders
- No stop-loss or iceberg orders allowed
These changes aim to create consistency across opening and closing price discovery processes.
Implementation Timeline
- Closing Auction Session (CAS): Effective August 3, 2026
- Revised Pre-Open Auction framework: Effective September 7, 2026
Stock Exchanges are required to upgrade systems, strengthen market surveillance, and amend relevant bye-laws to ensure smooth implementation.
Why CAS Matters for Investors
The introduction of CAS is expected to:
- Improve price accuracy at market close
- Reduce susceptibility to price manipulation
- Enhance confidence for institutional and passive investors
- Strengthen the overall integrity of Indian capital markets
By aligning Indian markets with global best practices, SEBI’s CAS framework represents a major step forward in modernizing market structure.
Source: SEBI Circular dated 16/01/2026