SEBI Proposes Changes to Closing Auction Session Framework, Derivatives Settlement
In a consultation paper, the Securities and Exchange Board of India (SEBI) has put forth seven important suggestions to improve liquidity, transparency and price discovery during the closing auction session (CAS). Until October 3, 2026, the public has been asked to submit comments.
SEBI has put forth two options for determining the settlement price of derivative contracts. Option one would use a mix of CAS and continuous trading session (CTS) trades to determine the price. Option 2 suggests continuing with CTS only settlement for a minimum of one year, with the possibility of including CAS based inputs at a later date.
The regulator has suggested eliminating the indicative index value, which is based on the indicative equilibrium price (IEP) and is now displayed during the CAS.
CAS Transition Time: The CAS transition duration has been recommended by SEBI to be reduced from the current five minutes to only one minute.
Post CAS F&O Window: It is suggested that the five minutes after the CAS F&O trading window be cut to five minutes from ten minutes.
Limit Order Cancellations: Once limit orders are submitted during the CAS, they cannot be cancelled if they are outside a plus or minus 1 percent range of the reference price. SEBI said that such orders could only be changed to raise their price.
Icebergs Orders: Iceberg orders that were not executed might enter the CAS as standard, completely disclosed limit orders.
There have been two alternative timing framework suggestions. In option A, CAS eligible shares would trade until 3.30 pm with F&O trading continuing until 3.45 pm after the CAS runs from 3.31 pm to 3.40 pm. According to Option B, stock trading would end at 3.15 pm, the CAS would run from 3.15 pm to 3.25 pm and F&O trading would close at 3.30 pm.
(Disclaimer: Given the input is on an information basis, please seek professional advice.)
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