SEBI Reviews Closing Auction Session Framework: Seven Proposals on Settlement Methodology, Market Timings and Operational Aspects
On September 12, 2026, the Securities and Exchange Board of India released a consultation paper inviting public feedback on several proposed modifications to the Closing Auction Session (CAS) framework, the settlement methodology applicable to derivatives contracts on expiry days, and related market timing structures. The deadline for submitting comments on Proposals 1 through 7 is October 3, 2026.
Background: The CAS Framework and Its Introduction
The CAS framework was operationalized in the equity cash segment for stocks on which derivatives contracts are available — commonly referred to as F&O Stocks — with effect from August 3, 2026, pursuant to a SEBI Circular. The introduction followed two prior rounds of public consultation conducted on December 5, 2024 and August 22, 2025, as well as deliberations with stock exchanges, broker associations, institutional investors and various other market participants.
How Closing Price Determination Has Changed
Before CAS was introduced, the closing price of a stock was computed as the Volume Weighted Average Price (VWAP) of transactions executed during the last 30 minutes of the Continuous Trading Session (CTS). With CAS in place, the closing price is instead derived through an equilibrium price discovery mechanism that aggregates buy and sell orders accumulated in an auction order book during the session.
A notable feature of the current arrangement is that derivatives segment trading continues while the underlying securities are undergoing their CAS-based closing price determination — a matter of heightened relevance on expiry days when options and futures activity clusters heavily toward the end of the trading day.
Observations from the Initial CAS Period
Derivatives Activity at the Close
SEBI's review of the initial operational period highlighted that derivatives activity remains heavily concentrated in the final stretch of the trading session, both before and during CAS. A comparison of premium turnover in expiring benchmark index options during the pre-CAS period (February 2026 to July 2026 — 26 expiries each) and the post-CAS period (August 3 to September 3, 2026 — 5 expiries each) revealed the following:
Pre-CAS Period:
| Time Window | NSE (% of Day's Turnover) | BSE (% of Day's Turnover) | NSE Avg. Premium/Minute (₹ cr) | BSE Avg. Premium/Minute (₹ cr) |
|---|---|---|---|---|
| 09:15 a.m. – 3:30 p.m. | 100% | 100% | 176.74 | 167.60 |
| 2:30 p.m. – 3:00 p.m. | 8.83% | 10.57% | 195.11 | 221.38 |
| 3:00 p.m. – 3:30 p.m. | 5.72% | 6.75% | 126.31 | 141.48 |
Post-CAS Period:
| Time Window | NSE (% of Day's Turnover) | BSE (% of Day's Turnover) | NSE Avg. Premium/Minute (₹ cr) | BSE Avg. Premium/Minute (₹ cr) |
|---|---|---|---|---|
| 09:15 a.m. – 3:40 p.m. | 100% | 100% | 119.36 | 110.46 |
| 2:45 p.m. – 3:15 p.m. | 9.80% | 9.22% | 150.14 | 130.68 |
| 3:15 p.m. – 3:20 p.m. (Transition) | 1.72% | 1.57% | 158.30 | 133.68 |
| 3:20 p.m. – 3:30 p.m. (CAS) | 4.13% | 6.79% | 189.82 | 288.94 |
The data demonstrates that the average traded premium per minute during the CAS window (3:20 p.m. to 3:30 p.m.) was considerably higher than during the comparable pre-CAS window (3:00 p.m. to 3:30 p.m.). On NSE, the per-minute figure rose from ₹126.31 crore to ₹189.82 crore; on BSE, it moved from ₹141.48 crore to ₹288.94 crore.
Additionally, even during the five-minute Transition Period between CTS cessation and CAS commencement, average premium turnover amounted to ₹791.50 crore and ₹668.38 crore on NSE and BSE respectively on expiry days.
IEP-Based Derivatives Trading
Feedback received from market participants indicated that the Indicative Equilibrium Price (IEP) — which is an evolving and unexecuted price indicator during CAS — was being referenced while taking derivatives trading decisions. Since the IEP does not represent an actual executed transaction but only the price at which maximum quantity could theoretically be matched at a given instant, its use as a live trading signal raises concerns about potential misinterpretation.
Proposal 1 & 2: Revised Settlement Methodology for Derivatives
Understanding the Current Position
Prior to August 3, 2026: Settlement price of index and stock derivatives on expiry day was based on the VWAP of the last 30 minutes of CTS.
Post August 3, 2026: Settlement price is determined based on the CAS closing price, which is derived solely from CAS transactions.
SEBI has proposed two alternative approaches: