SEBI Cuts Closing Auction Session to 10 Minutes, Moves Expiry Settlement to 30-Minute VWAP

The Securities and Exchange Board of India has rewritten the Closing Auction Session framework ten weeks after it went live. Circular No. HO/47/11/11(3)2025-MRD-POD2/I/23843/2026, issued on 15 October 2026 to all recognised stock exchanges and clearing corporations, cuts the Closing Auction Session (CAS) in the equity cash segment to a 10-minute window from 3:30 pm to 3:40 pm, lets index and stock derivatives trade until 3:45 pm, and takes expiry-day settlement of derivatives off the auction price altogether. Expiring contracts will instead settle on the volume-weighted average price of the last 30 minutes of continuous trading. Everything except the rule on carrying unexecuted orders into the auction applies from Monday, 7 December 2026; the carry-forward rule applies from 8 February 2027.

The circular modifies SEBI's circular of 16 January 2026, which introduced CAS in the cash segment from 3 August 2026 for stocks that have derivative contracts, and the corresponding parts of Chapter 5 of the Master Circular for Stock Exchanges and Clearing Corporations dated 30 December 2024. Under the January design the auction ran for 20 minutes from 3:15 pm to 3:35 pm, derivatives traded until 3:40 pm, and the price discovered in the auction also fixed the settlement price of expiring index and stock derivatives. SEBI put that design up for review in a consultation paper dated 12 September 2026, and the October circular says the final changes draw on the public comments received, the recommendations of its Secondary Market Advisory Committee and discussions with the exchanges. Business Standard reported that the paper drew more than 20,000 responses and that a proposal to bar cancellation of limit orders placed beyond 1 per cent of the reference price did not survive into the circular.

The 10-minute auction, phase by phase

The new CAS has three phases. From 3:30 pm the exchange spends one minute computing the reference price and moving the book from the Continuous Trading Session (CTS) to the auction. From 3:31 pm there is a five-minute window in which both limit and market orders can be entered. From 3:36 pm only limit orders are accepted, market orders already in the book can no longer be modified or cancelled, and the last two minutes carry a random close: the system shuts order entry at an unannounced moment between 3:38 pm and 3:40 pm. Matching follows, and the exchange has to put out the closing price and executed quantity as soon as practicable after that.

The reference price is the VWAP of trades in the last 15 minutes of the CTS, so 3:15 pm to 3:30 pm rather than the 3:00 pm to 3:15 pm window of the January circular. If the stock did not trade in those 15 minutes, the day's last traded price is used; if it did not trade at all, the previous day's close; and where a corporate action is in play, the previous day's adjustable closing price or base price. Only limit and market orders are permitted, and both count towards the equilibrium price. New iceberg orders cannot be placed during the auction, so every fresh order discloses its full quantity, and stop-loss orders are shut out. Orders placed in CAS attract order-level margin.

Stock futures get a matching price-band rule. Between 3:30 pm and 3:45 pm the price bands for stock futures are aligned with the CAS bands of the underlying, and the dynamic flexing of price bands provided for in Chapter 1 of the Master Circular is switched off for that quarter-hour; flexing continues to operate during the CTS.

Derivatives run to 3:45 pm, except an index contract on its own expiry day

Index derivatives trade until 3:45 pm on every trading day, with one carve-out: on an expiry day, the index contracts that expire that day stop trading at 3:30 pm, the moment the cash market enters the auction. Stock derivatives trade until 3:45 pm on all days, including the expiry day of the contract itself. The post-close session in the cash segment, where trades go through at the closing price, runs from 3:50 pm to 4:00 pm.

Special trading sessions follow the same architecture in relative terms. The CAS lasts 10 minutes, derivatives close five minutes after the auction ends, and the 10-minute post-close session begins five minutes after derivatives close.

Expiry settlement moves to the 30-minute VWAP

The provision that will matter most to anyone who runs or audits a derivatives book is paragraph 4.9. For expiring index derivatives, the settlement price is the value of the underlying index computed from the VWAP of each constituent stock over the last 30 minutes of the CTS in the cash segment, which under the new timings is 3:00 pm to 3:30 pm. Exchanges have to compute and disseminate this indicative index value in real time through that half-hour. For expiring stock derivatives, clearing corporations will settle at the VWAP of the underlying stock over the same 30 minutes of the CTS across all exchanges; the exchanges must pass the VWAP and traded quantity to the clearing corporations and publish an indicative VWAP in real time.

The January circular had tied both settlement prices to the auction: the index settlement was the closing index built from the constituents' CAS closing prices, and the stock settlement was the volume-weighted average of the stock's closing prices across exchanges. From 7 December, the auction still sets the official closing price of the stock, which continues to flow into end-of-day valuations, index closes and the post-close session, but it no longer sets the price at which futures and options expire. On an expiry day, the closing price of a stock and the settlement price of its expiring futures will therefore be two different numbers, and the second will be known, at least indicatively, before the auction even begins.

The table sets the two regimes side by side.

Unexecuted orders carry into the auction from 8 February 2027

Paragraph 4.8 is the one provision with a later start date. From 8 February 2027, limit orders left unexecuted at the end of the CTS will carry forward into the CAS, except stop-loss orders and orders priced outside the CAS price bands. Unexecuted iceberg orders within the bands will also carry forward, converted into fully disclosed limit orders, unless the participant opted out of carry-forward when placing the iceberg order. Carried-forward iceberg orders rank below the other carried-forward limit orders, and among themselves are sequenced by the time of the original iceberg order; all carried-forward orders rank ahead of limit orders entered fresh during the auction. A participant may modify a carried-forward order, but modification resets its time priority and brings it within the order-level margin that applies to CAS orders; unmodified carried-forward limit and iceberg orders stay outside that margin.

Until February, the position stays as it was under the January circular, with the auction book built only from orders entered during the session.

Deadlines for exchanges, and what the buy side should reset

Stock exchanges and clearing corporations have to jointly amend their Standard Operating Procedures in consultation with SEBI within seven days of the circular, which takes them to 22 October 2026. They must also amend their bye-laws, rules and regulations where needed, issue operational guidelines, build the systems for the new sessions and the real-time indicative VWAP feeds, and publish the circular to members. SEBI issued the circular under section 11(1) of the SEBI Act, 1992 read with regulation 51 of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018.

For corporate treasuries, portfolio managers, brokers and the auditors who review their controls, the operational changes fall into the seven weeks before 7 December. Order-management and risk systems configured for a 3:15 pm auction start and a 3:40 pm derivatives close need new cut-offs; end-of-day valuation processes that assume the derivatives settlement price equals the cash closing price on expiry days need to pick up the separate 30-minute VWAP; and hedging desks that roll positions through the close should note that an expiring index contract cannot be traded after 3:30 pm even though the rest of the index book stays open until 3:45 pm. The detailed exchange and clearing corporation circulars that will carry the field-level mechanics are due once the SOP work is done, so the week after 22 October is the point at which to look for them.

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