Stories
SEBI U-Turns on Closing Auction Session, Severing Link to Expiry Settlement
- •SEBI revised its rules on the Closing Auction Session via a circular dated October 15, 2026, cutting its link to expiry-day settlement following widespread market backlash.
- •Starting December 7, the 10-minute auction session will run daily from 3.30 pm to 3.40 pm, but index derivatives expiring will stop trading at 3.30 pm.
- •Expiring index and stock contracts will now settle based on the volume-weighted average prices of their constituents during the last 30 minutes of continuous trading.
- •The regulatory shift reverses a controversial January 16 proposal, addressing trader complaints about extreme price swings and plunging volumes on expiry days.
- •Industry experts and traders hailed the decision as a major win that restores market stability and transparency by returning to familiar settlement methods.
Key Questions Answered
SEBI revised the Closing Auction Session (CAS) by cutting its link to expiry-day settlement, establishing a 10-minute session from 3:30 pm to 3:40 pm starting December 7, 2026. Under the new rules, expiring index derivatives will stop trading at 3:30 pm, while stock derivatives will trade until 3:45 pm.
Expiring index contracts will settle on an index value determined by the volume-weighted average prices (VWAP) of their constituents over the final 30 minutes of continuous trading. Similarly, expiring stock derivatives will settle on the underlying stock's VWAP across all exchanges during the same 30-minute window.
SEBI changed course following widespread trader complaints that the previous auction close caused erratic 1 percent price swings and reduced volumes on expiry days. A consultation paper generated over 20,000 comments, with market participants favoring the transparent 30-minute VWAP method instead.
