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SEBI Proposes Blended Derivatives Pricing and Closing Auction Changes
SEBI is considering new rules for the stock market’s closing auction.
The auction helps determine prices near the end of the trading day.
For derivatives that expire, one plan would combine prices from regular trading and the auction.
Another plan would use only prices from the last 30 minutes of regular trading for at least a year.
SEBI could later move to the combined method after observing how the auction works.
The regulator is also considering two possible daily schedules.
One schedule would keep regular trading open until 3:30 p.m.
and derivatives trading until 3:45 p.m.
Live estimated index values would stop during the auction, but estimated prices for individual securities would continue.
Some orders would have new cancellation rules, and unexecuted Iceberg orders could join the auction.
Public comments are due by October 3, 2026.
SEBI proposed two methods for calculating expiry-day settlement prices for index and single-stock derivatives.
The preferred long-term method would blend VWAPs from the final 30 minutes of continuous trading and the 10-minute CAS, weighted by actual traded value.
An alternative would retain the last-30-minute VWAP for at least one year before a possible transition to blended pricing.
SEBI outlined two timing options, including continuous trading until 3:30 p.m. followed by CAS and derivatives trading until 3:45 p.m.
The proposals would end live indicative index values during CAS, retain the ±3% price band, and allow unexecuted Iceberg orders to enter the auction.
- Who
- The Securities and Exchange Board of India (SEBI), with comments invited from market participants.
- What
- A consultation paper proposing changes to derivatives settlement prices, closing auction timings, information dissemination and order handling.
- Where
- Securities and derivatives markets using closing auction sessions; no specific exchange or venue is identified.
- When
- The consultation deadline is October 3, 2026; the proposed auction schedules include CAS ending at 3:40 p.m. or 3:25 p.m.
- Why
- To revise expiry-day price calculation, improve closing-price discovery, address interpretation of indicative index values and adjust auction operations.
Blended VWAP Framework
Interim Last-30-Minute VWAP
Expiry settlement calculation
Blended VWAP Framework
Settlement would combine trades from the final 30 minutes of continuous trading and the 10-minute CAS, with weights based on actual traded value.
Interim Last-30-Minute VWAP
Settlement would use only the VWAP from the final 30 minutes of continuous trading, excluding CAS trades.
Implementation timeline
Blended VWAP Framework
The blended method is presented as the intended long-term framework for settlement pricing.
Interim Last-30-Minute VWAP
The existing last-30-minute method could continue for at least one year to provide continuity and allow participants to become familiar with CAS before a possible transition.
CAS schedule
Blended VWAP Framework
One option would keep continuous trading open until 3:30 p.m., hold CAS until 3:40 p.m. and keep derivatives trading open until 3:45 p.m.
Interim Last-30-Minute VWAP
The alternative would hold CAS from 3:15 p.m. to 3:25 p.m. and end derivatives trading at 3:30 p.m.
Key facts
- Consultation authority
- Securities and Exchange Board of India (SEBI)
- Comment deadline
- October 3, 2026
- Long-term settlement proposal
- A blended VWAP using trades from the final 30 minutes of continuous trading and the 10-minute CAS, weighted by actual traded value
- Interim settlement alternative
- VWAP from only the final 30 minutes of continuous trading, potentially for at least one year
- Timing option one
- Continuous trading until 3:30 p.m., CAS from 3:31 p.m. to 3:40 p.m., and derivatives trading until 3:45 p.m.
- Timing option two
- CAS from 3:15 p.m. to 3:25 p.m., with derivatives trading ending at 3:30 p.m.
- Order rules
- Orders within 1% of the reference price could be cancelled or modified; orders from 1% to 3% could not be cancelled but could be improved
- Information and price band
- Live indicative index values would stop during CAS, individual-security IEPs would continue, and the existing ±3% price band would remain
Sources
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