Explained: How Sebi’s Closing Auction Session Will Determine Closing Prices Of Stocks

Sebi Introduces Closing Auction Session (CAS) to Determine Stock Closings

The Securities and Exchange Board of India (Sebi) has issued a circular outlining the framework for introducing a Closing Auction Session (CAS) to determine the closing prices of stocks in the equity cash segment of stock exchanges.

What is Closing Auction Session (CAS)?

CAS is a mechanism used globally to determine closing prices of stocks. It aggregates market interest into a single pool of liquidity, providing a fair and transparent closing price and improving the efficiency of execution for large orders.

How CAS Will Work

• The CAS will be implemented in a phased manner, starting with stocks that have derivative contracts.
• For all other securities, exchanges will continue to use the existing mechanism of the VWAP of trades executed during the last 30 minutes of the continuous trading session (CTS).

CAS Timings and Structure

The CAS will operate as a separate 20-minute session from 3:15-3:35 PM on all trading days.

• 5-minute transition phase from 3:15-3:20 PM to calculate the reference price.
• 5-minute order entry window from 3:20-3:25 PM for market participants to place both limit and market orders.
• Limit orders only from 3:25-3:30 PM.
• Order entry session will close randomly in the last two minutes.
• Order matching will take place from 3:30-3:35 PM.

Reference Price Decision

• The reference price for CAS will be determined by the VWAP of trades executed between 3:00-3:15 PM.
• If a stock does not trade during this window, the last traded price (LTP) of the stock during the day will be taken as the reference price.
• If the stock does not trade at all during the day, exchanges will use the previous trading day's closing price as the reference price, with suitable adjustments in case of corporate actions.

Price Band During CAS

Stocks will remain within a price band of plus or minus 3 per cent from the reference price during the auction session.

Order Types Allowed During CAS

• Only limit orders and market orders will be allowed during CAS.
• Exchanges will consider both for discovering the equilibrium price.
• Iceberg orders and stop loss orders will not be allowed.

Equilibrium Price Mechanism

Exchanges will determine the closing price using an equilibrium price mechanism, which is the price at which the maximum volume is executable.

Market Orders Priority Over Limit Orders

Market orders will be given priority over limit orders during order matching.

Treatment of Unexecuted CTS Orders

• All unexecuted limit orders of the continuous trading session will be carried forward to CAS, except stop loss orders, iceberg orders, and orders with prices beyond the applicable price band.
• Carried forward limit orders will have a higher time priority than limit orders placed during CAS.

Settlement of Derivative Contracts

The settlement price will be the closing price of the underlying index on the day of expiry, calculated based on the closing prices of its constituents.

Pre-Open Auction Changes

The pre-open session will continue to run for 15 minutes, with clearly defined phases for order entry, a system-driven random close, and order matching.

Implementation Timeline

The framework for CAS will be implemented in the equity cash segment from August 3, 2026.

Benefits of CAS

• CAS provides a more stable and less volatile closing price compared to the volatility often observed under a Volume Weighted Average Price based closing price methodology.
• CAS brings India in line with global best practices followed by major exchanges.
• CAS can help facilitate large institutional trades at a well-discovered price and act as a more efficient and transparent alternative to the block deal window.