SEBI CAS: Framework Revised; Auction Window Set, Reference Price Calculation for Eligible Securities Changed

The closing auction session is a short call auction at the end of the trading day, designed to set a fairer closing price. SEBI first set out the closing auction session idea in a January 2026 circular, and the new circular changes the settlement basis and fixes the timings.

This guide explains the phases of the closing auction session, the reference price, the change in expiry settlement, the dates and the effect on traders. The details come from a summary of the circular, so please check the original SEBI text.

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Closing Auction Session Timings: What the Circular Fixes

Time	Phase	Orders allowed
3:30 pm (1 minute)	Reference price calculation; switch from continuous trading to the auction	None
3:31 pm (5 minutes)	Order entry	Limit and market orders
3:36 pm (4 minutes)	Order entry continues	Limit orders only; market orders cannot be changed or cancelled
3:38 to 3:40 pm	Random close at a system chosen time	Entry ends
After 3:40 pm	Matching; closing price and quantity published	None
3:50 to 4:00 pm	Post close session at the closing price	Cash market

The headline calls the window 3:30 to 3:40 pm, and the phases of the closing auction session add up to that period. The random close in the last two minutes is meant to stop traders from trying to move the price at the very last moment.

Risk: Because the close is random, a trader cannot know the exact end time, so late orders can be missed.

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Reference Price: Final 15 Minute VWAP for Eligible Securities

Case	Reference price used
Trades in the last 15 minutes of continuous trading	Volume weighted average price (VWAP) of those trades
No trade in the last 15 minutes	Last traded price of the day
No trade all day	Previous closing price, adjusted for corporate actions

The reference price sets the starting point and the price band for the closing auction session. A VWAP over 15 minutes is harder to push than a single last trade, so the new method should reduce sudden spikes at the end.

The summary I read did not list the eligible securities, so I cannot say which stocks are in scope. SEBI's earlier proposal focused on liquid derivative stocks, but please check the circular.

Risk: Securities outside the eligible list will continue with the old closing price method, which can create two systems in the same market.

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Expiry Day Settlement Moves to a 30 Minute VWAP

Product	Settlement basis	Trading hours
Expiring index derivatives	Index value from the VWAP of constituents in the last 30 minutes	Stop at 3:30 pm on expiry day
Expiring stock derivatives	VWAP of the stock in the last 30 minutes across all exchanges	Until 3:45 pm
Other index derivatives	Normal	Until 3:45 pm

This is the main change from the January 2026 approach, when expiry settlement was to use the closing auction price. A 30 minute VWAP is spread over a longer period, which makes it harder for a single large order to move the settlement price.

Exchanges must send indicative values through the 30 minute window. Stop-loss orders are not allowed during the closing auction session, and no new iceberg orders can be placed in it.

Risk: Traders who held positions into the close to capture the auction price will need to rethink expiry day plans.

Order Rules in the Closing Auction Session

Order type	Treatment
Unexecuted limit orders	Carry forward from continuous trading, unless they are stop-loss orders or priced outside the auction band
Unexecuted iceberg orders	Carry forward as fully disclosed limit orders unless the trader opted out; lower time priority than other carried orders
Carried orders versus new orders	Carried orders rank ahead of orders placed during the closing auction session
Modification in the closing auction session	Allowed on carried orders, but time priority resets
New iceberg and stop-loss orders	Not allowed during the closing auction session

The stock futures price band between 3:30 and 3:45 pm is aligned with the closing auction session price band, and the dynamic flexing rule does not apply then. The report does not give the band percentages.

Dates and Who Is Affected

Date	What applies	Who acts
22 Oct 2026	Exchanges and clearing corporations file revised procedures	Exchanges
7 Dec 2026	Timings, settlement method, reference price, price bands and margins	Brokers, exchanges, traders
8 Feb 2027	Carry forward rules for unexecuted limit and iceberg orders	Brokers, algo traders

Brokers need to update order management systems, margin checks and the iceberg opt out. Algorithmic and institutional traders that use the closing price as a benchmark should review their models before 7 December.

What to Watch Next

1. The original SEBI circular, for the eligible securities and band percentages
2. Exchange notices on the revised procedures due by 22 October
3. Broker updates on the closing auction session and margin rules
4. Mock sessions before 7 December
5. Any change in expiry day volumes after the new settlement method

Conclusion

The revised closing auction session gives clear timings, a 15 minute VWAP reference price and a 30 minute VWAP for expiry settlement. The list of eligible securities is unverified, so check the circular before you plan trades.

Frequently Asked Questions

What is the closing auction session?

Ans. It is a short auction at the end of the trading day, from 3:30 to 3:40 pm, used to set a fairer closing price.

What are the closing auction session phases?

Ans. Reference price calculation at 3:30 pm, limit and market orders from 3:31 pm, limit orders only from 3:36 pm, and a random close in the last two minutes.

How is the closing auction session reference price calculated?

Ans. It is the VWAP of trades in the last 15 minutes of continuous trading, with fallbacks to the last traded price or the previous close.

How will expiring derivatives settle?

Ans. Expiring index and stock derivatives settle on the VWAP of the last 30 minutes of continuous trading and not the auction price.

When does the new framework start?

Ans. Timings, settlement, reference price, bands and margins apply from 7 December 2026, and the carry forward rules from 8 February 2027.

Are stop-loss orders allowed in the auction?

Ans. No. Stop-loss orders and new iceberg orders are not allowed during the closing auction session.

Which securities are eligible for the closing auction session?

Ans. The summary I read did not list them, so please check the SEBI circular.

Is this article investment advice?

Ans. No. It is educational and not a recommendation to buy or sell.