- Jefferies expects brokers to benefit more than exchanges from SEBI's revised CAS framework
- The new VWAP methodology for index derivatives settlement starts on December 7, 2026
- CAS timing shortened to 10 minutes with three distinct order acceptance phases
Jefferies On CAS: Jefferies sees a bigger benefit for stockbrokers than exchanges from the Securities and Exchange Board of India's (SEBI) revised closing auction session (CAS) framework, which changes the settlement-price methodology for index derivatives on expiry days.
The brokerage said the move removes regulatory uncertainty and should reduce expiry-day volatility, benefiting brokers whose order activity remains below pre-CAS levels.
Analysts Supratim Datta, Prakhar Sharma and Satvik Kanabar maintained a positive view on Groww, reiterating their ‘Buy' rating. However, Jefferies expects limited earnings upside for exchanges, with premium turnover having already returned to pre-CAS levels.
Why Jefferies Sees A Bigger Benefit For Brokers
SEBI has changed the methodology for calculating the settlement price of index derivatives on expiry days to the volume-weighted average price (VWAP), as proposed in its September 2026 consultation paper. The change will take effect from December 7, 2026.
Jefferies expects the revised methodology to reduce expiry-day volatility under CAS. This could benefit brokers whose order activity has remained below pre-CAS levels.
For exchanges, however, the scope for incremental earnings gains appears limited, according to the brokerage, as premium turnover has already recovered to pre-CAS levels.
Jefferies believes the removal of uncertainty surrounding the framework is a positive development for the sector, with brokers better positioned than exchanges to benefit from the changes.
SEBI Revises Closing Auction Session Timings
Under the revised framework, the closing auction session will run for 10 minutes, from 3:30 pm to 3:40 pm, compared with the earlier 20-minute window from 3:15 pm to 3:35 pm.
The auction will comprise three stages:
- Session 1: The reference-price and transition phase will begin at 3:30 pm and last one minute.
- Session 2: Limit and market orders will be accepted from 3:31 pm to 3:36 pm.
- Session 3: Limit-only orders will be accepted from 3:36 pm to 3:40 pm.
Order entry will close at a randomly determined time between 3:38 pm and 3:40 pm. The closure will be system-driven, after which exchanges will match orders under the auction framework and disseminate the closing price and executed quantity.
How The CAS Reference Price Will Be Calculated
The revised framework will use the VWAP of trades executed during the final 15 minutes of the continuous trading session in the cash market to determine the reference price for eligible securities.
Since continuous trading ends at 3:30 pm, the reference-price window will run from 3:15 pm to 3:30 pm, replacing the earlier 3 pm to 3:15 pm window.
If a security does not trade during the final 15 minutes, its last traded price for the day will be used. If it has not traded during the day, the previous trading day's closing price will serve as the reference price. Where a corporate action applies, the previous day's adjusted closing price or base price will be considered.
READ | SEBI Revises CAS Timings; Revises Order Types, Timings And Settlement From Dec 7
For expiry settlement, index derivatives will use the VWAPs of constituent stocks during the continuous trading session. Stock derivatives will be settled using the underlying stock's VWAP across exchanges.
Revised Trading Cut-Offs For Index And Stock Derivatives
SEBI has also specified separate trading cut-off times for index and stock derivatives.
Index derivatives will trade until 3:45 pm on regular trading days. However, expiring index derivatives contracts will stop trading at 3:30 pm on expiry days.
Stock derivatives will continue trading until 3:45 pm on all trading days, including expiry days. For stock futures, the applicable price band between 3:30 pm and 3:45 pm will be aligned with the price band used during CAS.
The existing framework for dynamically adjusting price bands will not apply during this period, although it will continue to apply during the relevant part of the continuous trading session.
The cash-market post-close session will run from 3:50 pm to 4 pm, with trades executed at the respective securities' closing prices.
Order Restrictions And Implementation Timeline
Only limit and market orders will be permitted during CAS, and both will be considered when calculating the equilibrium price. New iceberg orders and stop-loss orders will not be allowed during the auction.
Eligible pending iceberg orders will be carried forward into CAS as fully disclosed limit orders.
The revised framework was introduced after the cash-market CAS went live on August 3, 2026. Most of the latest changes will take effect from December 7, 2026, while the changes relating to iceberg orders will come into force on February 8, 2027.
For investors tracking the brokerage sector, Jefferies' assessment puts Groww in focus, with the brokerage expecting brokers to benefit more directly than exchanges from the revised framework.
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