- SEBI will introduce Closing Auction Session for eligible F&O stocks from August 3
- F&O stocks will stop cash trading at 3:15 p.m. followed by a Closing Auction until 3:35 p.m
- Equity derivatives trading hours will extend by 10 minutes till 3:40 p.m under new rules
The Securities and Exchange Board of India (SEBI) will roll out the Closing Auction Session (CAS) for eligible F&O stocks from Aug. 3, introducing a new auction-based mechanism to determine closing prices. The change will also extend equity derivatives trading by 10 minutes and is aimed at making closing prices better reflect market demand and supply.
What Changes From Aug. 3?
Cash market trading hours will remain unaffected, though traders in F&O-enabled stocks will see a new method for determining closing prices. The revised system replaces the current Volume Weighted Average Price (VWAP)-based model.
The revised framework will not affect stocks that are not part of the F&O segment. These shares will continue trading until 3:30 p.m., with their existing closing price methodology left untouched. F&O stocks, on the other hand, will stop trading in the cash market at 3:15 p.m., making way for a Closing Auction Session that will last until 3:35 p.m.
Stock and index derivative contracts will remain open until 3:40 p.m. under the revised schedule, extending trading by 10 minutes. The post-close window in the cash market will continue to run from 3:50 p.m. and 4 p.m., with all transactions carried out at the official closing price.
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How The New Auction Improves Price Discovery
In India's capital markets, the closing price is a crucial reference point with implications across multiple segments. It is used to compute benchmark indices such as the Nifty 50 and Sensex, establish the NAV of mutual funds and ETFs, settle derivatives contracts and determine portfolio values.
SEBI says the new Closing Auction Session is designed to improve how these prices are determined by making the process more transparent and reflective of genuine market demand and supply. Instead of relying on trades executed in the final moments of the session, the closing price will now be discovered through an auction involving multiple buy and sell orders.
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The new process is expected to produce closing prices that reflect broader market participation, while the shared auction pool should enhance liquidity for bulk transactions. The move also aligns India's trading framework with established practices at exchanges such as the NYSE and the London Stock Exchange.
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