The Securities and Exchange Board of India (SEBI) has convened a meeting of its Secondary Market Advisory Committee (SMAC) on Thursday to discuss feedback on its proposed Closing Auction Session (CAS) framework, as the regulator considers changes to the recently introduced mechanism.
The meeting will focus on responses to SEBI’s consultation paper, which received around 20,000 comments by the October 3 deadline. Beyond reviewing stakeholder feedback on its proposals, the regulator has not shared a detailed agenda.
For rollback
Market participants have largely favoured retaining the previous methodology for calculating derivatives settlement prices on expiry day that was based on the volume-weighted average price (VWAP) of trades executed during the final 30 minutes of the continuous trading session (CTS), rather than immediately adopting a blended approach that incorporates data from both the CTS and the Closing Auction Session.
SEBI introduced the CAS for stocks with futures and options (F&O) contracts on August 3, 2026. The auction-based mechanism is designed to improve the closing price discovery process by matching buy and sell orders to arrive at a single equilibrium price. Closing prices play a critical role in derivatives settlement, index calculations and the determination of mutual fund net asset values (NAVs).
The market was initially unprepared for the new mechanism, which shifted trading activity toward the auction window. As a result, the average daily turnover in the F&O segment fell to ₹193.34 lakh crore in August 2026, from ₹277.84 lakh crore in June and ₹214.30 lakh crore in July. Trading activity, however, rebounded after SEBI indicated that it would reconsider the methodology. Average daily turnover rose to ₹226.06 lakh crore in September and further to ₹275.77 lakh crore in October 2026.
Following its initial experience with the mechanism, SEBI decided to review the methodology for determining settlement prices, market timings and other operational aspects of the auction process.
The markets regulator has proposed two alternatives. The first is a blended VWAP that incorporates trades executed during both the final 30 minutes of the continuous trading session and the subsequent 10-minute Closing Auction Session, with traded value across both periods factored into the calculation. The second is to retain the existing VWAP-based methodology for at least one year before considering a transition to the blended approach following a review. Market participants have largely supported the latter option.
The consultation paper also sought feedback on alternative market timings, the dissemination of indicative index values during the auction session, and certain order-handling rules. SEBI’s final decision will follow an evaluation of stakeholder responses and deliberations on the proposed changes.