Sebi Asks Brokers To Accept Orders In First 5 Minutes Of Closing Auction

The Securities and Exchange Board of India (Sebi) has directed stockbrokers to update their systems so they can accept trade orders during the initial few minutes of the closing auction session (CAS), according to reports.

The CAS is a 20-minute window that begins at 3:15 pm, right after regular trading ends, and is used to determine the closing price of stocks. Under the current system, orders are not accepted between 3:15 pm and 3:20 pm, since these five minutes are reserved for calculating reference prices and transitioning from continuous trading into the auction.

Regulator Seeks To Boost Participation

Sebi has now asked brokers to accept orders during this five-minute gap as well, with the aim of improving market participation and price discovery, the reports added. Starting September, HDFC Securities will begin accepting aftermarket orders between 3:15 pm and 3:20 pm, the brokerage told Reuters and Mint, adding that the change should help improve liquidity and price discovery during the CAS.

The move follows several rounds of discussions between the regulator and stockbrokers aimed at making the new closing mechanism more efficient, the reports said.

The new system led to sharp swings in the Nifty 50 and BSE Sensex during its first few sessions after launch on August 3. Analysts reportedly linked the volatility to weak liquidity and depth in India's securities lending and borrowing (SLB) segment, which makes it harder for investors to short a stock.

Since then, exchanges have introduced measures such as displaying indicative prices for benchmark indexes during the auction session and rolling out shorter-tenor contracts within the SLB segment to strengthen the framework.

Mint had earlier reported that most domestic traders and retail investors had largely stayed away from the CAS window, making it the thinnest trading period of the day. This low liquidity contributed to unusual price movements and raised concerns about possible market manipulation.

Sebi Stands Firm On Framework

Sebi has ruled out scrapping the mechanism altogether. Chairman Tuhin Kanta Pandey earlier said that the regulator would not shut down the closing auction system simply because of pushback from the market.

The CAS framework was first introduced through a Sebi circular in January 2026 and became operational on August 3. Under the system, buy and sell orders are pooled during a dedicated end-of-day window and matched at an equilibrium price that allows the maximum possible volume of shares to trade.

For instance, if buyers seek to purchase 100,000 shares at ₹100 and sellers are willing to sell the same quantity at that price, ₹100 becomes the equilibrium, or closing, price. No trades take place during the auction itself. All eligible trades are executed together once the final price is set.

The session currently applies to 208 derivative-traded stocks and has replaced the earlier volume-weighted average price (VWAP) method for determining closing prices.