Stock Market Timings Change From Today: How SEBI's Closing Auction Will Work

India's equity market will operate under a new closing mechanism from Monday, with stocks that have futures and options (F&O) contracts shifting to a Closing Auction Session (CAS) after 3:15 pm. The change also creates three different end-of-day trading timelines across the cash and derivatives markets.

Under the new framework, continuous trading in F&O-linked stocks will end at 3:15 pm, after which they will enter a 20-minute auction to determine their official closing price. Other cash market stocks will continue normal trading until 3:30 pm, while index and stock derivatives will trade until 3:40 pm.

The move marks a significant change from the existing system, under which closing prices are calculated using the volume-weighted average price (VWAP) of trades executed during the final 30 minutes of continuous trading.

How The Closing Auction Will Work

Although continuous trading will end at 3:15 pm for eligible stocks, trading will not stop altogether.

Between 3:15 pm and 3:20 pm, the market will transition into the Closing Auction Session, during which no fresh orders can be entered.

From 3:20 pm to 3:25 pm, investors can place both market and limit orders, while exchanges will publish the indicative equilibrium price, buy-sell imbalances and indicative index values.

Between 3:25 pm and 3:30 pm, only limit orders will be accepted. Market orders placed earlier cannot be modified or cancelled during this phase.

The order entry window will close randomly between 3:28 pm and 3:30 pm to discourage last-minute order placement.

From 3:30 pm to 3:35 pm, exchanges will match all eligible orders at a single equilibrium price, which will become the stock's official closing price.

How The Closing Price Will Be Determined

Under the new system, all buy and sell orders will be pooled and executed at a single equilibrium price rather than throughout continuous trading.

The equilibrium price will be the level at which the maximum number of shares can be traded.

If multiple prices result in the same executable volume, the exchange will choose the one with the lowest unmatched order quantity. If a tie still exists, the price closest to the reference price will be selected. If no equilibrium price is discovered, the reference price itself will become the closing price.

Market orders will receive priority over limit orders, while remaining limit orders will be matched using the standard price-time priority principle.

Why SEBI Has Introduced CAS

The Securities and Exchange Board of India (SEBI) expects the Closing Auction Session to improve price discovery by concentrating liquidity at the end of the trading session.

The regulator also aims to reduce the impact of large trades placed in the final minutes of trading, which can disproportionately influence stock prices, benchmark indices, mutual fund NAVs and derivative settlements.

Passive funds tracking indices are expected to benefit as the auction enables large buy and sell orders to be executed at a common equilibrium price instead of moving the market during execution.

Closing auctions are already used by several major global exchanges, including the New York Stock Exchange and the London Stock Exchange.

What Changes For Traders

The revised framework also changes auto square-off timings for intraday traders.

For MIS positions, stocks covered under CAS will now be auto squared off at 3:10 pm, while non-CAS stocks will continue to have an auto square-off time of 3:25 pm. Index and stock derivatives will also be auto squared off at 3:25 pm.

Futures and options contracts themselves will continue trading normally until 3:40 pm and will not be part of the Closing Auction Session.

A post-close session will continue between 3:50 pm and 4 pm, during which trades will be executed at the official closing price determined through the auction.