The Securities and Exchange Board of India (SEBI) has revised the Closing Auction Session (CAS) framework to improve price discovery and reduce volatility on derivatives expiry days. According to a Jefferies report, the changes could provide greater recovery opportunities for brokers, while limiting additional earnings growth for stock exchanges as premium turnover has returned to pre-CAS levels.
Under SEBI’s circular dated October 15, 2026, settlement prices for expiring index derivatives will be calculated using the underlying index derived from the volume-weighted average prices (VWAP) of constituent securities during the final 30 minutes of continuous equity cash-market trading. For expiring stock derivatives, clearing corporations will determine settlement prices using the underlying stock’s VWAP across all stock exchanges during the same period.
The revised framework will take effect on December 7, 2026. It introduces a separate 10-minute closing auction session from 3:30 PM to 3:40 PM, with order entry closing randomly between 3:38 PM and 3:40 PM. Index derivatives will continue trading until 3:45 PM, except for expiring contracts, which will stop trading at 3:30 PM on expiry days. Stock derivatives will remain open until 3:45 PM, including on expiry days.
SEBI has also revised the treatment of unexecuted orders entering the closing auction. Eligible pending iceberg orders will be carried forward as fully disclosed limit orders unless participants opt out when placing the original order. These changes concerning unexecuted limit and iceberg orders will become effective on February 8, 2027.
Jefferies noted that daily traded orders have been recovering from the August 2026 lows recorded after CAS implementation. However, industry-wide index options premium average daily turnover has remained broadly stable since the November 2024 regulatory changes. The brokerage expects reduced expiry-day uncertainty to support brokers' order volumes, while the scope for further earnings gains for exchanges may remain limited.
SEBI stated that the revised provisions are intended to strengthen price discovery and support the orderly functioning of the equity cash and derivatives markets. CASansaar