In short: SEBI will run the Closing Auction Session (CAS) from 3:30 pm to 3:40 pm on all trading days starting 7 December 2026. The regulator keeps the 30‑minute volume‑weighted average price (VWAP) method for calculating settlement prices of expiring index and stock derivatives. Unexecuted limit and iceberg orders will move to the auction under new rules, with a random closure of the order‑entry window.
What has SEBI changed?
After reviewing the CAS framework, SEBI issued a circular that modifies the timing, order‑entry phases and settlement methodology for derivatives contracts. The key changes are:
- CAS timing: A dedicated 10‑minute auction will run from 3:30 pm to 3:40 pm on every trading day.
- Three‑phase structure:
- 3:30 pm – 3:31 pm: reference‑price calculation and transition of orders from the Continuous Trading Session (CTS) to CAS.
- 3:31 pm – 3:36 pm: order entry allowed for both limit and market orders.
- 3:36 pm – 3:40 pm: only limit orders can be entered; market orders cannot be modified or cancelled. The order‑entry window will close randomly between 3:38 pm and 3:40 pm.
- Transition of unexecuted orders: Pending limit orders will generally be carried forward into CAS, except for stop‑loss orders and those priced outside the auction price band. Unexecuted iceberg orders that lie within the price band will be converted into fully disclosed limit orders unless the participant opted out when placing the order.
- Derivatives trading cut‑off: Index‑derivative contracts that expire on a given day will stop trading at 3:30 pm, while stock‑derivative contracts will continue until 3:45 pm.
- Post‑close session: The cash‑market post‑close session will run from 3:50 pm to 4:00 pm, with trades executed at the closing price determined in CAS.
What about settlement prices for expiring derivatives?
SEBI retains the 30‑minute VWAP methodology for calculating settlement prices on expiry days:
- For expiring index derivatives, the settlement price will be based on the VWAP of the underlying index’s constituent securities during the final 30 minutes of the continuous cash‑market session.
- For expiring stock derivatives, clearing corporations will use the VWAP of the underlying stock over the same 30‑minute window across all stock exchanges.
Exchanges will supply the VWAP values and traded quantities to clearing corporations and will continuously disseminate indicative VWAP figures to market participants during the period.
Legal context
The changes are made under the authority of the Securities and Exchange Board of India Act, 1992 and the Securities Contracts (Regulation) Act, 1956, which empower SEBI to prescribe market‑timing and settlement rules for securities and derivatives.
Who is affected?
The revised framework impacts:
- All recognised stock exchanges that operate the equity cash segment.
- Clearing corporations that settle derivative contracts.
- Market participants – brokers, traders and institutional investors – who place limit, market or iceberg orders in the cash market and who hold expiring derivative positions.
Participants will need to adjust order‑routing systems to accommodate the new CAS phases and the random closure of the order‑entry window. They should also ensure that their risk‑management tools use the VWAP figures supplied by exchanges for expiry‑day settlement calculations.
What should readers do?
If you trade or hold derivative contracts, consider the following steps before 7 December 2026:
- Review your order‑management systems to confirm they can handle the three‑phase CAS schedule and the random closure of order entry.
- Verify that your clearing‑house or broker will receive the VWAP data for the final 30 minutes of the cash session and that settlement calculations are aligned with the retained methodology.
- Check any opt‑out preferences for iceberg‑order conversion, as the new rules will automatically convert eligible iceberg orders into disclosed limit orders.
- Stay updated on any further communications from your exchange or clearing corporation regarding implementation details.
Frequently asked questions
When does the new Closing Auction Session start?
The revised CAS timing of 3:30 pm to 3:40 pm will be effective from 7 December 2026.
Will the settlement methodology for expiring derivatives change?
No. SEBI retains the 30‑minute VWAP method for both index and stock derivatives on expiry days.
How are unexecuted iceberg orders treated under the new rules?
Unexecuted iceberg orders that fall within the auction price band will be converted into fully disclosed limit orders, unless the participant opted out when placing the order.
Sources
- SEBI – Review of certain aspects of the Closing Auction Session, market timings and settlement methodology for derivatives contracts
- ET Markets – Sebi revises CAS rules, changes derivatives expiry settlement methodology