SEBI Calls Single-Point SMAC Meeting on Thursday to Review Closing Auction Feedback — October 14, 2026

The Securities and Exchange Board of India (SEBI) has convened a dedicated, single-point meeting of its Secondary Market Advisory Committee (SMAC) on Thursday to deliberate on public feedback received for the Closing Auction Session (CAS) framework. The regulator has kept the agenda open to discuss extensive stakeholder responses regarding market timings and derivative settlement pricing.

The development comes shortly after SEBI concluded public consultations on its paper titled "Review of certain aspects of the Closing Auction Session, Market Timings and Settlement Methodologies for Derivative Contracts" on October 3, 2026. The market regulator received approximately 20,000 submissions from market participants, underscoring intense industry interest in the closing price determination mechanism.

Key Concerns Over Closing Auction Volatility

SEBI had rolled out the CAS mechanism in the equity cash segment for futures and options (F&O) stocks starting August 3, 2026, aiming to align domestic market operations with international standards seen in the United States and Hong Kong. Under the system, a short auction at the end of the trading day determines final cash market closing values.

However, market participants reported elevated volatility and wide price dislocations during the auction window, particularly on weekly and monthly expiry days. Sharp fluctuations in index and underlying equity values during the closing auction frequently triggered massive swings in option premiums, resulting in unexpected losses for retail participants and institutional traders alike.

Options Under Evaluation by SMAC

The advisory panel is expected to examine critical alternatives to address expiry-day distortions:

• Reverting to VWAP for Derivatives: Discontinuing the use of CAS for derivative contract settlement and returning to the volume-weighted average price (VWAP) calculation based on the final 30 minutes of continuous trading.
• Blended Settlement Methodology: Introducing a hybrid mechanism that combines weighted averages from both regular continuous trading and the closing auction.
• Revised Auction Windows: Adjusting transition periods between regular trading and auction sessions, alongside tighter reference price bands to prevent spoofing and anomalous execution spikes.

SEBI Chairperson Tuhin Kanta Pandey recently highlighted that the regulator is rapidly analyzing the inputs and aims to issue formal guidelines shortly. Thursday's SMAC deliberations are expected to form the foundation of SEBI's final policy circular, providing much-needed clarity to brokers, algorithmic trading desks, and derivative market participants across India.

Tags: SEBI SMAC Closing Auction Session NSE BSE Derivatives Market