SEBI resets the closing auction: 3:30-3:40 PM session, random close, iceberg carry-over and new expiry settlement prices from December 7
SEBI's October 15, 2026 circular makes the closing auction a 3:30-3:40 PM session with a random close, VWAP reference price and new F&O expiry settlement from December 7.
The last ten minutes of the Indian trading day are about to be rebuilt. Through circular HO/47/11/11(3)2025-MRD-POD2/I/23843/2026 dated October 15, 2026, the Securities and Exchange Board of India has modified its January 16, 2026 framework for the Closing Auction Session (CAS). The changes follow a consultation paper published on September 12, 2026 and advice from SEBI's Secondary Market Advisory Committee (SMAC). The core of the revamp takes effect from December 07, 2026, and the iceberg and carry-forward provisions in paragraph 4.8 follow on February 08, 2027.
For anyone who places orders near the close, holds index or stock futures and options into expiry, or simply watches how the closing price of a stock is formed, this pre-open note sets out what changes, when, and why it matters. Oquilia has drawn every timing and rule below from the SEBI circular; this note does not carry index levels or price forecasts, because none form part of the official record being reported.
Market Snapshot
Today's snapshot is a structural one: the timetable that will govern the cash and derivatives segments from December 07, 2026. Under the revised design, CAS becomes a separate 10-minute session running from 3:30 PM to 3:40 PM, sitting after continuous trading in the cash market ends at 3:30 PM.
The 10-minute session is broken into four phases, as set out in the circular.
| Time (IST) | Phase | Duration | What is permitted |
|---|---|---|---|
| 3:30 PM | Reference price and transition | 1 minute | System computes the CAS reference price |
| 3:31 PM | Order entry | 5 minutes | Limit and market orders may be entered |
| 3:36 PM | Limit-only phase | 4 minutes | Limit orders only; market orders cannot be modified or cancelled |
| 3:38 PM to 3:40 PM | Random close | Up to 2 minutes | System-driven random close ends the auction |
The random close between 3:38 PM and 3:40 PM is the most important design feature in this table. Because no participant knows the exact second at which order collection stops within that 2-minute window, the incentive to drop large orders at the final instant to move the closing price is reduced. Random-end auctions are a well-understood tool in market design for exactly this reason.
The second table sets out how the wider market day lines up against the new CAS, segment by segment.
| Segment / session | Timing from December 07, 2026 |
|---|---|
| Cash market continuous trading (CTS) | Ends 3:30 PM |
| Closing Auction Session (cash) | 3:30 PM to 3:40 PM |
| Cash post-close session | 3:50 PM to 4:00 PM, at the closing price |
| Index derivatives (non-expiry days) | Trade until 3:45 PM |
| Expiring index contracts (expiry day) | Stop at 3:30 PM |
| Stock derivatives (all days, including expiry) | Trade until 3:45 PM |
The asymmetry on expiry day is deliberate. Expiring index contracts stop at 3:30 PM, the moment cash continuous trading ends, while stock derivatives continue until 3:45 PM even on their expiry days. Index derivatives on non-expiry days also run on to 3:45 PM, giving futures and options traders 15 minutes of price discovery alongside the 10-minute cash auction.
What Moved Yesterday
The development behind this note is regulatory rather than a price move: SEBI's October 15, 2026 circular, now on the record for four days, which rewrites five distinct parts of the close. Each is summarised below with the rule as SEBI has framed it.
1. A new reference price. The CAS reference price will be the volume-weighted average price (VWAP) of the last 15 minutes of continuous trading. If that cannot be computed, the fallback is the day's last traded price (LTP), and failing that, the previous close. A 15-minute VWAP is harder to distort with a single trade than a last-traded print, which is the logic behind anchoring the auction to it. Readers new to how thin trading can distort prices may find the Oquilia glossary entry on liquidity useful context.
2. Price bands and flexing in the 3:30 to 3:45 PM window. From 3:30 PM to 3:45 PM, the price band for stock futures is aligned with the CAS band, and dynamic flexing of price bands is suspended during that window. In plain terms, for those 15 minutes a stock future cannot drift outside the range within which its underlying cash share is being auctioned, which keeps the two markets tethered while the closing price is formed. The glossary entry on volatility explains why exchanges cap intraday price movement.
3. Order types. Only limit and market orders are allowed in CAS. No new iceberg orders and no new stop-loss orders may be placed in the auction. Unexecuted limit orders from continuous trading carry into CAS automatically, except stop-loss orders and orders outside the price band.
4. Iceberg carry-over. Unexecuted iceberg orders, where only part of the quantity is shown in the order book, will carry over into CAS as fully disclosed limit orders unless the trader opts out, and they will receive lower time priority. This provision, paragraph 4.8 of the circular, applies from February 08, 2027, two months after the main changes. Institutional desks that split large orders using iceberg instructions will need to decide, order by order, whether they are comfortable with full disclosure at the close.
5. Margins. Order-level margin applies in CAS. The exception is orders carried over from continuous trading, which are not subjected to a fresh order-level margin check unless they are modified.
| Rule area | Position under the October 15, 2026 circular | Effective |
|---|---|---|
| CAS reference price | VWAP of last 15 minutes of CTS; else LTP; else previous close | December 07, 2026 |
| Order types in CAS | Limit and market only; no new iceberg or stop-loss | December 07, 2026 |
| CTS limit order carry-over | Automatic, except stop-loss and out-of-band orders | December 07, 2026 |
| Iceberg carry-over | Fully disclosed limit order, lower time priority, unless opted out | February 08, 2027 |
| Stock futures band 3:30 to 3:45 PM | Aligned with CAS band; dynamic flexing suspended | December 07, 2026 |
| Margin in CAS | Order-level margin, except unmodified carried-over orders | December 07, 2026 |
What to Watch Today
The circular sets the rules, but the operational detail will come from the stock exchanges and clearing corporations over the 49 days between October 19 and December 07, 2026. Four items deserve attention.
Expiry settlement prices. This is the change with the most direct effect on derivative profit and loss. Under the circular, index derivatives will settle on an index value computed from the VWAP of index constituents in the last 30 minutes of continuous trading. Stock derivatives will settle on the VWAP of the last 30 minutes of continuous trading across exchanges. The exchanges will disseminate real-time indicative values during the window, so a trader holding an expiring position can watch the likely settlement figure form instead of waiting for a single closing print.
| Contract | Expiry settlement basis from December 07, 2026 |
|---|---|
| Index futures and options | Index value from VWAP of constituents, last 30 minutes of CTS |
| Stock futures and options | VWAP of last 30 minutes of CTS, across exchanges |
| Transparency measure | Real-time indicative settlement values disseminated |
A 30-minute averaging window means one large trade at 3:29 PM carries far less weight in the final settlement number than it would under a single-point close. For a holder of an in-the-money option, the payoff on expiry is tied to that averaged value, so the exact figure that determines it is now spread over 30 minutes of trading rather than concentrated at the bell.
Exchange implementation circulars. SEBI's circular is addressed to market infrastructure institutions, and the exchanges typically publish their own operational circulars, mock-trading schedules and FAQ documents ahead of an effective date. Members and their clients should look for those notices from the exchanges in the weeks before December 07, 2026, and test order-routing systems against the new 3:31 PM and 3:36 PM phase boundaries.
Broker order-handling changes. Because market orders cannot be modified or cancelled after 3:36 PM, and because no new stop-loss orders are allowed in CAS, retail platforms will need to restrict or relabel certain order types in the 3:30 PM to 3:40 PM window. Investors should read any broker notification issued before December 07, 2026 carefully, since a stop-loss placed during continuous trading will not carry into the auction.
Your own trading routine. If you routinely place orders after 3:25 PM, plan for a market day where the cash close comes at a random point between 3:38 PM and 3:40 PM and the post-close session runs from 3:50 PM to 4:00 PM. Long-term investors running a monthly SIP through a mutual fund are unaffected at the order level, since fund units are allotted at NAV; the SIP calculator and step-up SIP calculator remain the right tools for planning those contributions, and the lumpsum calculator covers one-time investments. Readers seeking a primer on the regulator itself can see the Oquilia glossary entry on SEBI.
For context on other primary-market developments this week, see Oquilia's report on the Jio Platforms IPO price band of Rs 1,065 to 1,119, and for fund flows, the note on AMFI data showing a record Rs 29,361 crore monthly SIP contribution. Mutual fund investors can cross-check scheme data at AMFI.
FAQ
When does the new closing auction session start?
The revised Closing Auction Session takes effect from December 07, 2026, under SEBI circular dated October 15, 2026. The iceberg and carry-forward provisions in paragraph 4.8 apply later, from February 08, 2027.
What are the new closing auction session timings?
CAS runs as a separate 10-minute session from 3:30 PM to 3:40 PM. It opens with a 1-minute reference price phase at 3:30 PM, a 5-minute order entry phase from 3:31 PM, a 4-minute limit-only phase from 3:36 PM, and a random system-driven close between 3:38 PM and 3:40 PM.
How is the closing auction reference price calculated?
The reference price is the VWAP of the last 15 minutes of continuous trading. If that is unavailable, the day's last traded price is used, and if that too is unavailable, the previous close.
Can I place a stop-loss or iceberg order in the closing auction?
No. Only limit and market orders are permitted in CAS. New iceberg and stop-loss orders are not allowed, and stop-loss orders from continuous trading do not carry into the auction. From February 08, 2027, unexecuted iceberg orders carry over as fully disclosed limit orders with lower time priority unless you opt out.
Until what time will index and stock derivatives trade?
Index derivatives trade until 3:45 PM, except on expiry day, when expiring index contracts stop at 3:30 PM. Stock derivatives trade until 3:45 PM on all days, including their expiry days.
How will F&O expiry settlement prices change?
Index derivatives will settle on an index value derived from the VWAP of constituents over the last 30 minutes of continuous trading. Stock derivatives will settle on the VWAP of the last 30 minutes of continuous trading across exchanges, with real-time indicative values disseminated.
Does the change affect my mutual fund SIP?
Not at the order level. Mutual fund units are allotted at NAV, not through exchange order books, so the CAS timetable effective December 07, 2026 does not change how a SIP instalment is processed.
Source: SEBI circular HO/47/11/11(3)2025-MRD-POD2/I/23843/2026 dated October 15, 2026. This note is for information only and is not investment advice. Exchange operational circulars may add implementation detail before December 07, 2026.