The Securities and Exchange Board of India (SEBI) has received more than 3,500 responses to its consultation on proposed changes to the Closing Auction Session (CAS), highlighting the strong interest surrounding one of the most significant recent changes to India’s equity-market structure. SEBI Chairman Tuhin Kanta Pandey said the regulator would move quickly on the proposed modifications after receiving extensive feedback from market participants.
The consultation comes only weeks after CAS was introduced in India’s equity cash market. The system, which began on August 3, 2026, was designed to improve the process used to determine closing prices by concentrating trading activity into an auction rather than relying entirely on the final moments of continuous trading. SEBI had previously consulted market participants on the framework before its implementation.
Why SEBI Is Reviewing CAS
The review follows concerns about price movements during the new closing auction, particularly on derivatives expiry days. Because the closing price of the underlying securities can influence derivatives settlement, sharp movements during CAS can have a direct impact on traders holding expiring contracts.
Reuters reported that the introduction of CAS was followed by sharp swings during expiry sessions, prompting SEBI to reconsider how derivatives settlement prices should be calculated. The regulator’s September 12 consultation paper proposes several possible changes while retaining the broader CAS framework.
SEBI’s consultation is therefore not simply about abandoning the auction system. Instead, the regulator is examining how CAS interacts with derivatives settlement, market timings, order cancellations and the information displayed to market participants.
Two Options for Derivatives Settlement
One of the most important proposals concerns the way index and single-stock derivatives are settled on expiry days.
SEBI has proposed two alternatives. The first is a Blended Volume Weighted Average Price, which would combine trading information from the final 30 minutes of normal trading with the 10-minute closing auction.
The second is a CTS VWAP, which would calculate the settlement price using the final 30 minutes of the continuous trading session and temporarily separate derivatives settlement from the CAS closing price. Reuters reported that the second approach could remain in place for at least a year before a possible transition to the blended methodology.
The consultation system currently lists both options and asks respondents to indicate their level of agreement with each proposal.
Changes to Information Available During the Auction
SEBI is also examining the information displayed during CAS.
One proposal would stop exchanges from disseminating the index-level value derived from individual stocks’ Indicative Equilibrium Prices during the auction. However, the individual security-level indicative prices would continue to be available.
The proposal is intended to address concerns around how information displayed during the auction could affect trading behaviour. At the same time, the individual stock-level information would continue to provide market participants with information about price discovery.
Possible Changes to Market Timings
SEBI is also considering changes to the timing of continuous trading, CAS and derivatives trading.
The consultation paper presents alternative timing structures. One option would allow CAS stocks to continue continuous trading until 3:30 p.m., followed by the auction, with derivatives trading continuing until 3:45 p.m. Another option would end continuous trading for CAS stocks at 3:15 p.m. and bring derivatives trading to an earlier close at 3:30 p.m.
These alternatives are intended to address the relationship between the cash market, closing auction and derivatives market while providing a more predictable structure around the end of the trading day.
Restrictions on Order Cancellations
Another proposal focuses on limit orders placed far away from the reference price.
SEBI has proposed restricting cancellation of limit orders placed beyond 1% from the reference price during CAS. Such orders could still be modified if the modification improves the price, but they could not simply be cancelled under the proposed framework.
The proposal is designed to change the incentives surrounding large orders placed during the auction and potentially reduce the ability to enter and withdraw orders at the end of the trading process.
Iceberg Orders Could Enter the Auction
SEBI is also proposing changes involving iceberg orders.
Under the proposal, the unexecuted quantity of an iceberg order remaining at the end of continuous trading could participate in CAS as a normal limit order, with the entire pending quantity disclosed in the auction order book.
The measure could increase the quantity of orders available during CAS and potentially contribute to greater participation in the closing auction.
Why the Consultation Has Attracted Strong Interest
The unusually large response reflects the importance of CAS to brokers, traders, institutional investors and other market participants. The closing price is used for several financial and investment purposes, while its connection to derivatives settlement makes the auction particularly important on expiry days.
SEBI’s own consultation process shows that respondents can comment separately on each proposal and provide their rationale rather than simply voting for or against the entire package. The regulator’s public-comment system explicitly states that the process is intended to collect reasoned feedback rather than function as a vote.
The deadline for submitting comments on the current CAS consultation is October 3, 2026.
What Happens Next
SEBI Chairman Tuhin Kanta Pandey has indicated that the regulator intends to move ahead with the proposed CAS modifications following the substantial response.
The final changes could affect how India’s closing prices are determined, how derivatives are settled on expiry days, what information traders receive during auctions and how orders behave during the closing process.
For investors and market participants, the important development is that SEBI is reviewing the implementation details of CAS only weeks after its launch. The consultation process will allow the regulator to consider feedback before deciding which proposals should be adopted and how the revised framework should operate.
About The Author
