Sebi Reworks Closing Auction Weeks After Launch, Ends Its Say In Derivatives Settlement

Sebi has moved to stop the closing auction from deciding where expiring derivatives settle, revising a framework that went live only on August 3. The changes take effect from December 7, 2026.

When the closing auction session (CAS) began, the stock and index closes it produced doubled as the expiry settlement price. Feedback on that arrangement led to the revision.

Under the new design, a single auction print will no longer carry that weight. A price averaged over 30 minutes is harder to tilt through a late order imbalance. It is expected to ease expiry-day basis risk and lower the chance of option pay-offs being reset by cash-auction flows.

Expiring stock derivatives will settle at the stock’s volume weighted average price (VWAP) across exchanges over the last 30 minutes of continuous trading. Index contracts will settle on index values computed from the 30-minute VWAPs of their constituents. Exchanges will have to publish indicative VWAPs and index values in real time through the window.

The trading day stretches too. Continuous cash trading will run till 3:30 pm, against 3:15 pm for F&O stocks now. CAS shrinks to 10 minutes, ending at 3:40 pm, with order entry stopping at a random moment after 3:38 pm. Derivatives will trade till 3:45 pm.

Expiry day is the exception. Expiring index contracts will stop at 3:30 pm, but expiring stock derivatives will carry on until 3:45 pm, leaving them open for 15 minutes after their settlement window has closed.

Stock futures bands between 3:30 pm and 3:45 pm will follow the CAS band. Dynamic flexing, which automatically widens a price band when set thresholds are met, will be suspended in this stretch but stay in force during continuous trading.

From February 8, 2027, eligible iceberg orders left over from continuous trading will enter the auction as fully disclosed limit orders unless traders opt out. An iceberg order is a large trade broken into small ones, with only a slice visible at a time.

CAS stays as the mechanism for the official cash close, but it no longer sets the benchmark for derivatives expiry.