SEBI to Issue Revised Closing Auction Session Guidelines Within a Week, Says Chief Tuhin Kanta Pandey — October 10, 2026

Capital markets regulator Securities and Exchange Board of India (SEBI) is set to issue comprehensive guidelines on the Closing Auction Session (CAS) framework within a week. Speaking on the sidelines of an industry event organized by the Commodity & Capital Market Participants Association of India (CPAI), SEBI Chairman Tuhin Kanta Pandey confirmed that the regulator is swiftly reviewing stakeholder feedback and will issue an official circular shortly.

While recent social media discussions and commentary occasionally conflate the acronym CAS with Consolidated Account Statements—which track demat and mutual fund holdings—the regulator's immediate policy action centers on the exchange Closing Auction Session mechanism and its direct impact on equity derivatives.

Surge in Stakeholder Feedback

The consultation period for proposed modifications to the closing auction and settlement rules officially closed on October 3, 2026. Although initial assessments indicated over 3,500 comments, SEBI later revealed that submissions surged to 20,000 before the 7:00 PM deadline, reflecting immense interest and concern across domestic trading desks, foreign portfolio investors, and retail participants.

"Today is the last date, and we will actually quickly look at all these comments and go ahead, because I think our proposals are quite clear," Pandey stated. He added that the compilation and evaluation process would not take long because the proposals in the consultation paper were narrowly targeted and specific.

Why the CAS Framework Is Being Overhauled

SEBI introduced the Closing Auction Session on August 3, 2026, covering all individual stocks eligible for trading in the Futures & Options (F&O) segment. Under this architecture:

• Continuous trading for eligible F&O equities concludes at 3:15 PM instead of the standard 3:30 PM cutoff.
• A dedicated auction session runs between 3:15 PM and 3:35 PM to pool limit orders and match trades at a single equilibrium price.
• The resulting auction price determines the official closing benchmark, replacing the traditional 30-minute Volume Weighted Average Price (VWAP) calculation.

Although the auction methodology was designed to align Indian equity bourses with global exchanges like the NYSE and LSE to prevent last-minute price rigging, its rollout triggered substantial volatility. Traders witnessed extreme swings near market close, particularly on weekly index expiry days for both the BSE Sensex and NSE Nifty. In several instances, deep out-of-the-money options experienced sharp intraday spikes during the auction window due to mismatched cash and derivative pricing dynamics.

Key Proposals Under Regulatory Review

SEBI’s September 12 consultation paper sought participant recommendations to address operational friction and illiquidity during the end-of-day window.

Primary Areas Covered in the Consultation:

• Derivative Expiry Settlement: Choosing between a blended VWAP that combines the last 30 minutes of continuous trading with the auction window, or temporarily retaining the continuous trading session (CTS) VWAP for at least one year until auction depth matures.
• Market Timings and Windows: Assessing potential extensions to continuous trading in CAS securities until 3:30 PM, alongside extended derivative trading hours up to 3:45 PM.
• Order Restrictions: Tightening order modifications and restricting the cancellation of limit orders placed beyond a 1% threshold of the reference price during the auction.
• Transition Gaps: Narrowing the operational pause between continuous trading and the auction phase to one minute or less.

Feedback from market bodies, including the Futures Industry Association (FIA) and local broker associations, has heavily favored retaining the familiar 30-minute continuous VWAP for derivatives settlement in the near term. Chairman Pandey maintained that while the CAS mechanism remains an essential microstructural reform that is here to stay, the regulator is committed to resolving transition issues and ensuring that derivatives settlement remains transparent and resilient.

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