SEBI's decision to restore the final 30-minute continuous-session VWAP for derivatives settlement, effective Dec. 7, 2026, addresses one of the principal concerns surrounding the Closing Auction Session introduced in August.
Over the past two and a half months, Vtrender Technologies has closely tracked the behaviour of closing auctions, particularly on derivatives expiry days. Our observations have focused on abrupt indicative-price movements, the relationship between auction prices and continuous-market trading, and the consequences of using auction-derived closing prices for derivatives settlement.
The central issue was never whether India needed a closing auction. Auctions serve an important function in concentrating liquidity and establishing closing prices. The concern was whether a price determined during a short auction window should also decide the settlement value of a much larger derivatives market.
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The revised framework makes that distinction.
Cash-market closing prices will continue to be determined through CAS, while expiring derivatives will settle against the volume-weighted prices established during the final 30 minutes of continuous trading. This reduces the direct influence of auction-specific price movements on derivatives settlement.
Importantly, the auction itself remains. Its effectiveness in delivering reliable closing prices, adequate liquidity and orderly price discovery must continue to be measured.
For Indian markets, this is a constructive regulatory adjustment. It preserves the development of a closing-auction mechanism while addressing a significant source of uncertainty for derivatives participants.
The next phase should focus on measurable outcomes: auction participation, closing-price deviations, price-band behaviour and liquidity concentration. Better market structure must ultimately be demonstrated through market data.
Shai Coelho is Founder, Vtrender Technologies
Disclaimer: The views expressed here are those of the author's and do not necessarily represent the views of NDTV Profit or its editorial team.
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