The short
- Auction, not VWAP: A post-afternoon call auction would set the official close, aligning India with major markets.
- Start small: Phased rollout beginning with liquid derivative stocks; possible later expansion to other highly liquid names.
- Orderly band: Trading constrained around a reference price (e.g., ±3%) to reduce manipulation and spikes.
How CAS works
Four phases
- Reference set: Exchanges compute a reference price (e.g., VWAP from ~3:00–3:15 pm).
- Order entry: Market participants enter/modify/cancel limit orders within a protected band.
- Random close: Randomized cut-off to deter gaming.
- Matching & print: Call auction uncrosses; the uncross price becomes the official closing price.
Protections
- Price band: Auction operates in a tight corridor (illustratively ±3% vs. reference) to keep things orderly.
- Transparency: Indicative price/imbalance publication reduces guesswork and slippage.
CAS should compress tracking error for index funds/ETFs and improve closing-print reliability for valuation & settlement.
Proposed timings & scope
Window Illustratively ~3:15–3:35 pm for CAS, near the 3:30 pm market close, with a randomized end inside the window.
Scope Start with stocks in the derivatives segment; extend after operational learnings.
Expiry nuance On expiry days, near-month stock derivatives may align to a slightly later close than index derivatives to accommodate CAS operations.
Note: Specifics are from SEBI’s consultation drafts and may change in the final rules.Who gains, who adapts
| Group | Likely impact |
|---|---|
| Passive funds/ETFs | Better match to index close; lower tracking error on rebalance days. |
| Active managers | Cleaner reference price; tighter end-of-day execution. |
| HFT/liquidity providers | Richer auction mechanics; new strategies around imbalance supply/demand. |
| Retail | Clearer close; may need to adapt to auction mechanics on rebalance/expiry days. |
What to watch next
Final spec
Exact band width, disclosure cadence (indicative price/volume), and randomization rules.
Rollout plan
Exchange readiness, mock auctions, and go-live sequencing by stock cohorts.
Downstream rules
Index methodology tweaks; closing NAV calculation templates for MFs/ETFs.
Behaviour shifts
Last-hour liquidity migration into the auction and impact on regular-session spreads.
FAQ
- Will there still be a post-close trading session? Exchanges may retain a post-close session for trades at the official close; the auction only sets the close.
- What about broad-market stocks? SEBI signals expansion after the derivative-stock cohort proves stable.
Disclosure: This explainer summarises a regulatory proposal and may evolve after public comments and final SEBI/exchange circulars.