At present, the closing price of a stock is based on the volume-weighted average price of trades between 3:00 pm and 3:30 pm. Sebi said this method can sometimes distort prices, especially for large orders placed near market close. Globally, most major markets already use an auction-based system to decide 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 calculating a reference price, order entry, and order matching. Orders will close randomly in the last two minutes to prevent manipulation.
Initially, CAS will apply only to stocks that have derivatives contracts. For other shares, the existing VWAP-based method 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 permitted. The closing price will be discovered through an equilibrium price mechanism, which selects the price at which the maximum volume can be matched. If multiple prices qualify, Sebi has laid out clear rules to pick 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 NAVs. The regulator also noted that CAS will help passive funds and large investors execute trades at fair prices with lower impact costs.
Along with CAS, Sebi has also aligned the pre-open auction session with the new framework. The pre-open session will remain 15 minutes long, from 9:00 am to 9:15 am, with defined 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 changes to the pre-open session will take effect from September 7, 2026. Stock exchanges and clearing corporations have been asked to update systems, strengthen surveillance, and issue detailed operating guidelines ahead of rollout.
Sebi said these changes are aimed at improving price discovery, protecting investors, and bringing Indian markets closer to global best practices.