SEBI has allowed a separate auction session to determine closing stock prices

Capital markets regulator SEBI has decided to change the way of calculating the closing price of shares in the equity cash market. Instead of using the average price of trades in the last 30 minutes of trading, exchanges will move to a new system called the Closing Auction Session (CAS).

Currently, the closing price of the stock is based on the volume-weighted average price of the trade between 3:00 pm and 3:30 pm. Sebi said this method can sometimes distort prices, especially for large orders close to the market. Globally, most major markets already use an auction-based system to determine closing prices.

Under the new framework, CAS will run for 20 minutes from 3:15 pm to 3:35 pm on all trading days. The session will have separate phases for calculation of reference price, order entry and order matching. Orders will be closed randomly in the last two minutes to prevent manipulation.

Initially, CAS will only apply to stocks that have derivatives contracts. For other stocks, the existing VWAP-based methodology will continue for now. The reference price for the auction will be calculated using the VWAP of trades between 3:00 pm and 3:15 pm. If there are no trades in that window, the last traded price of the day will be used.

During CAS, both market and limit orders will be allowed, but stop-loss and iceberg orders will not be allowed. The closing price will be found by the equilibrium price method, which selects the price that matches the maximum volume. If multiple prices qualify, SEBI has laid down clear rules for selecting the final closing price.

Sebi said the change will make closing prices more transparent and reliable. This is important because closing prices are used for derivative settlement, index calculation and mutual fund NAV. The regulator also noted that CAS will help passive funds and large investors to trade at fair prices with low impact costs.

Along with CAS, SEBI has also aligned the pre-open auction session with the new framework. The pre-open session will be 15 minutes long, from 9:00 am to 9:15 am, with scheduled phases for order entry and matching and random closing in the last two minutes.

The new closing auction system will be implemented from August 3, 2026, while the change to the pre-open session will come into effect from September 7, 2026. Stock exchanges and clearing corporations have been asked to update the system, strengthen monitoring and issue detailed operating guidelines before the rollout.

Sebi said the changes are aimed at improving price discovery, protecting investors and bringing Indian markets closer to global best practices.