Closing auction session phased roll out from August 3, 2026; SEBI issues circular

Closing auction session phased roll out from August 3, 2026; SEBI issues circular

Market regulator Securities and Exchange Board of India (SEBI) has finally decided to introduce a Closing Auction Session (CAS) in the equity cash segment, changing how closing prices of shares are discovered. Closing Auction Session (CAS) is a well defined, short trading period at the end of the day where market participants submit buy or sell orders to determine a single, fair closing price for a security. The new mechanism will come into effect from August 3, 2026, while changes to the pre-open auction session will be implemented from September 7, 2026, SEBI said in a circular issued on Friday.

Currently, closing prices in the equity cash segment are determined using the volume-weighted average price (VWAP) of trades executed during the last 30 minutes of the trading session. SEBI said global markets follow an auction-based closing price discovery system, which aggregates liquidity and provides a more transparent and representative closing price.

The regulator highlighted that closing prices play a critical role as benchmarks for derivative settlements, index computation and mutual fund net asset value (NAV) calculation, making robustness and fairness essential.

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Phased implementation

CAS will be introduced in a phased manner. In the initial phase, only the closing price of stocks with derivative contracts will be determined through CAS. For all other securities in the cash segment, the closing price will continue to be calculated using the VWAP of the last 30 minutes of trading session.

How the closing auction will work

The Closing Auction Session will run for 20 minutes from 3:15 pm to 3:35 pm on all trading days. From 3:15 pm to 3:20 pm, there will be a transition phase from Continuous Trading Session (CTS) to CAS, during which the reference price will be calculated based on the VWAP of trades between 3:00 pm and 3:15 pm. Between 3:20 pm and 3:25 pm, both market and limit orders can be entered. From 3:25 pm to 3:30 pm, only limit orders will be allowed, with no modification or cancellation of market orders. The order entry session will close randomly anytime between 3:28 pm and 3:30 pm.

Order matching will take place from 3:30 pm to 3:35 pm, and the closing price will be discovered using an equilibrium price mechanism, defined as the price at which the maximum executable volume is available.

If multiple prices qualify, the price with the minimum unmatched quantity and closest to the reference price will be selected. If no equilibrium price is discovered, the reference price itself will be treated as the closing price.

Price bands and order rules

A price band of 3 percent from the reference price will apply during CAS. The same band will apply to stock futures between 3:15 pm and 3:40 pm, and the existing framework for dynamic flexing of price bands for stock futures will not apply during this period.

Only market and limit orders will be permitted in CAS. Iceberg and stop-loss orders will not be allowed. Unexecuted limit orders from the continuous trading session will be carried forward to CAS, subject to conditions.

Impact on derivatives and post-close session

The equity derivatives segment will continue trading until 3:40 pm. The post-close session in the cash market will operate from 3:50 pm to 4:00 pm, with trades executed at the CAS-derived closing price.

SEBI has also modified the framework for settlement prices of stock and index derivatives, linking them to closing prices discovered through CAS. Stock exchanges and clearing corporations have been directed to jointly issue standard operating procedures within 30 days of the circular i.e. February 15, 2026.

Pre-open session changes

To align with CAS, SEBI has revised the pre-open auction session, which will run from 9:00 am to 9:15 am with random closure during the last 2 minutes of order entry. The revised pre-open framework will be effective from September 7, 2026.

SEBI has asked stock exchanges to strengthen surveillance systems to monitor trading activity during reference price determination and the closing auction to safeguard market integrity.

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