SEBI Chief Says No Evidence of Manipulation in New Closing Auction Session
SEBI Chairman Tuhin Kanta Pandey said on 12 August 2026 that the regulator has found no evidence of manipulation in the new closing auction session (CAS) in the equity cash segment. Speaking at an event in Mumbai, he called the CAS "a very big microstructure reform" and said that "many of our global counterparts have already done it", citing Japan, Hong Kong, the US, Germany, Europe and Australia.
The remark came barely ten days after the mechanism went live. Pandey acknowledged stakeholder concerns, said SEBI is reviewing feedback and is open to measures that could increase participation, and described the process as transparent, with the price always visible during the session.
The framework behind the session
The CAS was introduced by SEBI Circular HO/47/11/11(3)2025-MRD-POD2/I/2765/2026 dated 16 January 2026, addressed to all recognised stock exchanges and clearing corporations. It followed consultation papers dated 5 December 2024 and 22 August 2025 and deliberations in SEBI's Secondary Market Advisory Committee. The circular text fixed 3 August 2026 as the start date for the CAS and 7 September 2026 for the changes to the pre-open session.
Before the CAS, the closing price of a stock was the volume weighted average price (VWAP) of trades in the last 30 minutes. Under the new method, the closing price is the equilibrium price at which the maximum volume is executable, discovered through a call auction.
Timings from 3:15 pm to 3:35 pm
| Start | Phase | What happens |
|---|---|---|
| 3:15 pm | Reference price calculation (5 minutes) | Reference price is the VWAP of trades between 3:00 pm and 3:15 pm, or the last traded price if there were no such trades, or the previous close if the stock did not trade that day |
| 3:20 pm | Order entry (5 minutes) | Limit and market orders can be entered, modified or cancelled |
| 3:25 pm | Order entry (5 minutes) | Only limit orders; the session closes at a system-driven random time between 3:28 pm and 3:30 pm |
| 3:30 pm | Order matching (5 minutes) | Orders are matched at the equilibrium price |
Rules on price and orders
- Orders in the CAS carry a price band of 3% on either side of the reference price.
- Only limit and market orders are allowed. Iceberg and stop-loss orders are not permitted.
- If more than one price yields the maximum volume, the tie is broken by minimum unmatched quantity and then by proximity to the reference price. If no equilibrium price is discovered, the reference price becomes the closing price.
- Unexecuted limit orders from continuous trading carry into the CAS with higher time priority; a modified order loses that priority. Margins apply at order level, except for unmodified carried-over orders.
- A post-close session from 3:50 pm to 4:00 pm allows trades at the CAS closing price.
Scope and derivatives
The CAS applies in phases. It covers only stocks that have derivative contracts; other securities continue with the 30-minute VWAP method. The equity derivatives segment trades until 3:40 pm, dynamic price-band flexing does not apply between 3:15 pm and 3:40 pm, and settlement prices follow the modified framework. The pre-open session was also realigned: 15 minutes from 9:00 am, random closure between 9:08 am and 9:10 am, and order matching from 9:10 am, with the same order types and priorities as the CAS. Exchanges had to frame standard operating procedures within 30 days of the circular.
What the statement means and does not mean
The chairman's comment is a view on the evidence so far. It is not an enforcement order, does not name any participant and does not rule out future misuse. Unusual price moves or order concentration near the close do not by themselves prove manipulation; a regulatory finding has to rest on evidence linking conduct to wrongdoing. Surveillance of the session continues.
What professionals should do now
- Brokers and intermediaries: update order routing for the 3:15 pm to 3:35 pm window, block iceberg and stop-loss orders in the CAS, and keep records showing that closing-session orders were authorised and reviewed.
- Institutional investors and fund managers: document the rationale and timing of large market-on-close orders, since the closing price now comes from the auction and orders sit visibly in the book.
- Listed companies: do not describe an unexpected closing price as manipulation, internally or publicly, without facts. Escalate on evidence.
- Auditors and valuers: for derivative-linked stocks, the official closing price from 3 August 2026 is the CAS equilibrium price, not the 30-minute VWAP. Continue to use it as the quoted price under the applicable valuation framework; the chairman's remark does not justify any adjustment.
Participants who have concerns about liquidity in the auction can expect SEBI to consider feedback, as the chairman indicated, but the circular remains the governing framework until SEBI issues any change.
Updated on 28 September 2026: added the SEBI circular of 16 January 2026 with its number, CAS timings, price band, order rules, scope, derivatives and pre-open changes, and the chairman's name, venue and remarks.
