SEBI Overhauls Market Timings and Derivatives Settlement Rules Effective December 7, 2026

Capital markets regulator Securities and Exchange Board of India (SEBI) has released a comprehensive overhaul of trading timings, the Closing Auction Session (CAS) framework, and expiry-day derivatives settlement mechanisms across Indian bourses.

The revised framework resolves weeks of industry deliberation following a consultation paper issued in September that drew over 20,000 public comments. The core provisions will come into force on December 7, 2026, while the rules governing the rollover of iceberg orders will take effect on February 8, 2027.

Restructured Closing Auction Window

Under the revised structure, continuous trading in the cash equity segment will run until 3:30 PM, after which the dedicated 10-minute Closing Auction Session will operate from 3:30 PM to 3:40 PM across all trading days.

Phases of the Closing Auction Session:

• 3:30 PM – 3:31 PM: A one-minute buffer allocated for calculating reference prices and transitioning orders from continuous trading.
• 3:31 PM – 3:36 PM: A five-minute order-entry window permitting both limit and market orders.
• 3:36 PM – 3:38/3:40 PM: A final phase where only limit orders are accepted, while market orders cannot be cancelled or modified. The session will close at a random timestamp during the last two minutes to discourage algorithmic gaming and last-second order spoofing.

The cash market post-close trading session will run between 3:50 PM and 4:00 PM, allowing participants to execute trades at the day's established closing price.

Extended Hours for Derivatives Trading

To ensure seamless risk mitigation and allow domestic institutional and retail traders to hedge against closing auction price discovery, SEBI has extended trading hours for futures and options (F&O):

Derivatives Operational Timings:

• Index Derivatives: Normal trading will continue until 3:45 PM on regular days. However, on contract expiry days, expiring index contracts will cease trading at 3:30 PM.
• Stock Derivatives: Trading will remain open until 3:45 PM on all trading days, including contract expiry days.

Retention of 30-Minute VWAP for Settlement

Addressing widespread concerns from brokers and proprietary trading desks over an earlier proposal for a blended auction-cash settlement price, SEBI opted to retain the traditional 30-minute Volume-Weighted Average Price (VWAP) calculation.

On expiry days, the settlement price for both expiring index and individual stock derivatives will continue to be computed using the underlying cash market VWAP from the final 30 minutes of the continuous trading session (3:00 PM to 3:30 PM). This retention eliminates the risk of single-tick price spikes in the auction session causing out-of-the-money options to suddenly flip into the money during physically settled stock contract expiries.

Order Rules in the Auction Session

To preserve order-book integrity during the auction, SEBI established rigid placement guidelines. Unexecuted limit orders from the regular session will automatically carry forward into the CAS, subject to standard exchange price bands. Unexecuted iceberg orders will transition as regular, fully disclosed limit orders into the auction book, subject to an opt-out facility.

However, participants will not be allowed to enter new iceberg orders or stop-loss orders during the auction window.

Tags: SEBI NSE BSE F&O Trading Indian Stock Market