SEBI introduces closing auction session to reform equity closing prices

SEBI Introduces Closing Auction Session for Equity Cash Segment

Markets regulator SEBI has decided to introduce a closing auction session (CAS) in the equity cash segment, a new framework that will make the discovery of closing prices more transparent and robust.

Key Features of CAS

• Implementation Phases: The CAS will be implemented in a phased manner, as per SEBI's circular.
• Initial Implementation: The CAS will initially apply only to cash market stocks that have derivative contracts.
• Transition Period: The CAS will run for 20 minutes, from 3:15 pm to 3:35 pm, on all trading days and will operate as a separate session after the continuous trading session.
• Structure: The CAS will include phases for transition from continuous trading, order entry for both market and limit orders, a limit-only order period with random closure in the last two minutes, and final order matching.

CAS Timing and Structure

The CAS will run for 20 minutes, from 3:15 pm to 3:35 pm, on all trading days and will operate as a separate session after the continuous trading session.

Impact on Derivatives and Post-Close Sessions

• Equity Derivatives: The equity derivatives segment will continue trading till 3:40 pm.
• Post-Close Session: The post-close session in the cash market will run from 3:50 pm to 4:00 pm, during which trades will be executed at the closing price.

Price Band Norms and Risk Management

• Price Band: A price band of plus or minus 3 per cent of the reference price will apply during CAS.
• Risk Management: Risk management and margin requirements applicable to the cash market will continue during CAS, with certain relaxations for unmodified carried-forward limit orders.

Operational Guidelines and Implementation Timeline

• Operational Guidelines: SEBI has asked stock exchanges and clearing corporations to jointly formulate standard operating procedures for settlement prices and price-band alignment within 30 days.
• Implementation Timeline: The CAS framework will be implemented from August 3, 2026, while the revised pre-open auction framework will come into effect from September 7, 2026.