Summary of this article
Sebi expects fresh CAS guidelines in about a week.
Proposed changes cover settlement prices, trading hours and auction rules.
Sebi is reviewing expiry-day volatility and indicative index values
Tuhin Kanta Pandey, the chairman of the Securities and Exchange Board of India (Sebi) had said that fresh guidelines on the Closing Auction Session (CAS) will likely be released in about a week, following concerns over how the mechanism affects derivatives trading and expiry-day settlement.
“Following review of the CAS, a consultation paper was put out to address concerns in respect of settlement price of derivatives on expiry-day. We are currently examining the comments and hope to issue guidelines in about a week’s time,” Pandey said at the BSE Brokers’ Forum’s Market Confluence 2026 in Mumbai on October 10, 2026.
Sebi’s September 12 consultation paper proposed changes to derivatives settlement prices, trading hours, and the CAS order-matching process. The regulator took up a review of the CAS framework after brokers, exchanges, institutional investors and other market participants flagged concerns over its functioning. The paper also flagged concerns over movements in indicative index values and sharp movements in some index options nearing expiry.
CAS Explained: The Issues With Expiry-Day Settlement
CAS came into effect on August 3, 2026 for stocks that have futures and options (F&O) contracts. Before its introduction, exchanges calculated closing prices using the volume-weighted average price (VWAP) of trades during the final 30 minutes of continuous trading.
Under CAS, buy and sell orders are collected in an auction, and the closing price is determined at the level where the maximum possible quantity can be traded.
Derivatives continue to trade even after the underlying stocks enter the closing auction. This has raised concerns over expiry-day settlement, particularly when traders are still actively trading contracts nearing expiry.
Sebi’s data showed that average premium turnover per minute in expiring index options during the 3:20 PM to 3:30 PM CAS period stood at Rs 189.82 crore on the NSE, against Rs 126.31 crore during the final 30 minutes of trading before CAS was introduced. On the BSE, the figure rose to Rs 288.94 crore from Rs 141.48 crore.
The regulator also noted that traders were using the indicative equilibrium price (IEP) displayed during CAS to make decisions on derivatives contracts. The IEP reflects the price at which the maximum possible quantity could be matched based on orders available at that moment. It can change as orders are placed, modified or cancelled, and is not an actual traded price.
Sebi’s Proposals
Sebi has proposed two options for calculating expiry-day settlement prices for index and single-stock derivatives. The first would use a blended volume weighted average price (VWAP), combining trades from the final 30 minutes of continuous trading with those executed during the 10-minute CAS period. The contribution of each period would depend on actual traded value, rather than a fixed weight.
The second option would return to the pre-CAS method, using only trades executed during the final 30 minutes of continuous trading. Sebi has proposed that this could serve as an interim arrangement, with a possible shift to the blended method after at least a year. Such a change would depend on CAS liquidity, participation, and Sebi’s assessment of how the auction performs. It would not happen automatically.
The consultation paper also sets out two alternatives for market timings. Under the first, continuous trading in all stocks would continue until 3:30 PM, CAS would run from 3:31 PM to 3:40 PM, and derivatives trading would end at 3:45 PM. Under the second, continuous trading in CAS stocks would end at 3:15 PM, CAS would run until 3:25 PM, and derivatives trading would close at 3:30 PM. Non-CAS stocks would continue trading until 3:30 PM under both options.
Both alternatives would reduce the transition period between continuous trading and CAS from five minutes to up to one minute. The post-CAS derivatives trading window would also be cut from 10 minutes to five minutes. Sebi said market feedback suggested that a shorter window would suffice, although traders in single-stock derivatives may still need time to manage positions and delivery obligations.
Two other proposals seek to change how orders are handled during the auction. Sebi has proposed that limit orders placed beyond 1 per cent and up to 3 per cent of the reference price should not be cancellable during CAS. Traders would still be allowed to improve their order prices, and the existing 3 per cent price band would remain unchanged.
Sebi has also proposed allowing unexecuted iceberg orders from continuous trading to enter CAS as normal limit orders, with their entire pending quantity disclosed in the auction book. This could bring more orders into the closing-price discovery process.
Besides, Sebi is also considering stopping the dissemination of indicative index values calculated from evolving IEPs during CAS, while continuing to publish IEPs for individual stocks. It said such index values could be mistaken for actual levels reached by the index even though the underlying auction prices had not been finalised yet.
Further, the regulator is examining the comments received before issuing its guidelines.
